Ecuador takes full control of oil resources

QUITO - Ecuador's government today took control of Occidental Petroleum's operations, three days after canceling the US company's contract, sparking fears that nationalisation of energy resources is spreading in Latin America.

Occidental, Ecuador's biggest investor before the contract was revoked, said it was seeking damages of more than US$1 billion ($1.62 billion) as part of an arbitration claim against the government for seizing its assets.

"Now, we are in control of all of Occidental's technical operations," said an official at state oil company Petroecuador, who asked not to be named.

Ecuador revoked Occidental's contract over a long-running dispute that centered on the government's accusations that the company sold part of an oil block without authorisation. Occidental maintains it kept the government informed through the process.

The move comes only weeks after President Evo Morales of Bolivia sent troops into his country's natural gas fields and announced their nationalisation. There has also been growing state control of Venezuela's oil sector under President Hugo Chavez.

Ecuador's decision to terminate Occidental's contract followed mounting pressure from Indian groups and poor residents of the oil-rich Amazon region who demanded the exit of the American company.

Protesters said Occidental exploited their oil wealth without sharing the benefits with local communities and embodied US "imperialism" in the region.

Petroecuador replaced Occidental executives running its oil fields in the Amazon region with state officials.

Occidental has filed a claim with the International Center for Settlement of Investment Disputes in Washington, invoking protections under a US-Ecuador investment treaty.

It has asked the arbitration panel for interim relief by restoring its rights in Ecuador and preventing its assets from being handed to anyone else.

The Ecuadorean government said the claim lacks legal basis and that the country followed the rule of law.

Ecuador is considering forging a joint venture with another unnamed Latin American state-run oil company to operate Occidental's oil fields, government officials said. Another option is to tender the fields to other private operators.

Some of the companies mentioned in connection with this proposal are Venezuela's PDVSA, Brasil's Petrobras, Chile's ENAP, Mexico's Pemex and Colombia's Ecopetrol.

Occidental had about 330 employees in Ecuador, but more than 300 local employees were fired on Wednesday and the company has begun relocating expatriate staff, said Occidental spokesman Larry Meriage.

Output at Occidental's oil fields were at normal levels of 101,400 barrels of oil per day on Thursday, according to Petroecuador.

- REUTERS