Oxy Calls Seizure by Ecuador Retaliation, Denies Allegation

Occidental Petroleum Corp. fired back at Ecuadorean officials, accusing them of bowing to “nationalist fervor” and seizing the company’s oil operations as revenge for losing a tax case to Occidental.

In a complaint filed Wednesday but made public Thursday, Occidental asked the World Bank’s International Center for Settlement of Investment Disputes to immediately restore the oil company’s Ecuadorean production contract and to halt government moves to bring in a new operator.

“This dispute results from a transparent attempt by [Ecuador] to eviscerate and ultimately repudiate an investment agreement worth well in excess of $1 billion in retaliation” for Occidental’s July 2004 victory over Ecuador in a $75-million tax arbitration, the company said in its mediation request.

Westwood-based Occidental added that officials of the South American nation ousted the oil company “in the midst of a wave of nationalist fervor” that included anti-Occidental protests and threats of criminal charges aimed at anyone who questioned the takeover.

Ecuador, however, said Occidental breached its oil agreement when it farmed out some production to Canada’s EnCana Corp. in 2000 without the government’s permission. Citing that as grounds for revoking Occidental’s contract, state-run Petroecuador took over the U.S. oil company’s operations Tuesday, forcing Occidental to dismiss most of its 330 employees there.

In its arbitration filing, Occidental said its deal with EnCana gave that company a 40% “economic interest” that would be converted into an ownership stake only if Ecuador approved the transfer. The company said that it never received that approval and that Occidental retained 100% ownership of the project.

Gonzalo Flores, senior counsel at the international settlement panel in Washington, said Occidental’s arbitration request was under review. If the case is accepted, a tribunal selected jointly by Occidental and Ecuador will weigh a possible preliminary injunction and begin proceedings, Flores said.

Occidental shares fell 48 cents to $92.38. They have dropped almost $7 this week.