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February 22, 2008 |
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PETROECUADOR: Prosecutor Urges Annulment of Petrobras' Contracts Ecuadorian Attorney General Xavier Garaicoa is recommending that the government cancel Petroecuador's two oil concessions with Brazil's Petroleo Brasileiro SA, Bloomberg News reports. According to Prensa Latina, Mr. Garaicoa submitted the request to rescind Petroleo Brasileiro's contracts to Mining and Oil Minister Galo Chiriboga, who will conduct an investigation. Mr. Garaicoa confirmed to Prensa Latina that Petroleo Brasileiro breached two laws, so its contract will be terminated. Items 11, 12 and 13 of article 74 of the Hydrocarbons Act were violated. Mr. Garaicoa told the press that Petroleo Brasileiro didn't follow proper procedure when it sold some rights to the Block 18 and Palo Azul oil concessions to Teikoku Oil Co. in 2005. Prensa Latina relates that Petroleo Brasileiro transferred 40% of its rights and obligations in Block 18 and Palo Azul to Teikoku Oil. The transfer of the minority stakes in the fields to Teikoku was made before receiving government authorization, Bloomberg News says, citing Mr. Garaicoa. Mr. Garaicoa told Prensa Latina that Petroleo Brasileiro breached item 12 of the article 74 of the Hydrocarbons Act, which prohibits the integration of consortiums and associations without authorization from the mining and oil ministry. The group that manages the fields isn't registered with the Hydrocarbons Office. This voided the participants' rights to the fields retroactive to 1999, Bloomberg News notes, citing the attorney general. Petroleo Brasileiro denied the allegations and told Reuters that it has always been in contact with the proper authorities and respected the current legal framework. According to the company, the transfer of rights in block 18 secured the oil ministry's approval in 2007. Minister Chiriboga told Reuters that the call for Petroecuador to stop Petroleo Brasileiro's concessions won't jeopardize talks to restructure the oil extraction accord between the two firms. According to Bloomberg News, Petroleo Brasileiro is renegotiating its contracts with the Ecuadorian government. Deadline for the renegotiation is March 8. Minister Chiriboga commented to Reuters, "While there is no decision on the termination of a contract, that contract is operational . . . yes, negotiations will continue." Reuters notes that Mr. Garaicoa's recommendation isn't binding, but it would prompt Petroecuador to consider ending Petroleo Brasileiro's contract. The termination of the contracts would allow Petroecuador to take over Petroleo Brasileiro's assets. The process could take months or even year, Reuters states, citing experts and government officials. About Petroleo Brasileiro Headquartered in Rio de Janeiro, Brazil, Petroleo Brasileiro SA aka Petrobras -- http://www2.petrobras.com.br/ingles/index.asp - - was founded in 1953. The company explores, produces, refines, transports, markets, distributes oil and natural gas and power to various wholesale customers and retail distributors in Brazil. Petrobras has operations in China, India, Japan, and Singapore. About Petroecuador Headquartered in Quito, Ecuador, Petroecuador -- http://www.petroecuador.com.ec -- is an international oil company owned by the Ecuador government. It produces crude petroleum and natural gas. * * * In previous years, Petroecuador, according to published reports, was faced with cash-problems. The state-oil firm has no funds for maintenance, has no funds to repair pumps in diesel, gasoline and natural gas refineries, and has no capacity to pay suppliers and vendors. The government refused to give the much- needed cash alleging inefficiency and non-transparency in Petroecuador's dealings. In 2008, a new management team was appointed to turn around the company's operations. |
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