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Perenco Ecuador Limited

Perenco Will Protect Its Rights in Ecuadorian Oil Seized in Defiance of International Arbitration Tribunal Orders

London (ots/PRNewswire)

Perenco Ecuador Limited ("Perenco Ecuador") today announced that
it is prepared to take legal action against any company that
purchases or transports crude oil the Ecuadorian Government has
unlawfully seized.
Perenco Ecuador is the Operator of Blocks 7 and 21 in Ecuador. On
February 19, 2009, the Republic of Ecuador and its oil company,
Empresa Estatal Petroleos del Ecuador ("Petroecuador"), commenced a
coercive process to collect from Perenco approximately US$327 million
they claimed were due under a 2006 Ecuadorian law ("Law 42") by which
the Government asserts a right to 99% of the oil revenues above an
arbitrary "reference price." In March 2009, Petroecuador began
seizing crude oil produced by Perenco and its consortium partner,
Burlington Resources Oriente Ltd. ("Burlington"), from Blocks 7 and
21 in Ecuador to satisfy the alleged Law 42 debt.
However, on May 8, 2009, a three member international arbitration
tribunal constituted under the auspices of the International Centre
for the Settlement of Investment disputes ("ICSID") unanimously
ordered that the Republic of Ecuador and Petroecuador were restrained
from "instituting or further pursuing any action" -- including oil
seizures -- "to collect from Perenco any payments [they] claim are
owed... pursuant to Law 42." The tribunal made clear that such orders
"are binding on the party to which they are directed" and that the
parties "are under an international obligation to comply" with them.
A copy of the tribunal's order can be found on the ICSID website, Just this week, a different international
arbitration tribunal in a separate ICSID arbitration commenced by
Burlington issued a similar provisional measures order.
Despite these ICSID tribunal orders, the Ecuadorian Government
has announced that it plans to go forward with a July 3 auction of
the crude oil it has seized from Perenco and Burlington. The
Government first attempted to sell the seized oil at an earlier
auction in May, but no buyers materialized. Now it is trying again.
With the second auction looming and a third scheduled for later
this month, Perenco Ecuador has indicated that it will take a firm
stand to protect its rights. According to Rodrigo Marquez, Latin
American Regional Manager for the Perenco Group, "Anyone who
purchases the seized crude oil under the circumstances is buying
property that Ecuador and Petroecuador are not entitled to sell. The
arbitration tribunals' orders establish that Perenco and Burlington
continue to have the right to sell that oil, and that the disputed
portion of the sale price should be placed into escrow. Consequently,
anyone who buys at the Government auction may be liable for
conversion or other misdeeds. Perenco is prepared to enforce its
rights wherever it becomes necessary to do so."
At the same time, Perenco has continued to support a negotiated
resolution of its dispute with Ecuador and Petroecuador. "We remain
open to negotiations with the Government about fair terms for
continued operations in Ecuador," said Mr. Marquez. He noted,
"Perenco has consistently made clear to the Government that we prefer
to have an agreement rather than an arbitration. That remains true
Perenco Ecuador Limited is part of a privately held upstream oil
and gas company and is the operator of Blocks 7 and 21 in Ecuador.


Rodrigo Marquez, Perenco Group, +44-20-7901-8200