Oriente limbo

Nov. 15, 2003
Ecuadorian officials warn that a high-profile case against US major ChevronTexaco Corp. may further delay their plans to be a leading Latin American oil exporter this decade.

Maureen Lorenzetti
Washington Editor

Ecuadorian officials warn that a high-profile case against US major ChevronTexaco Corp. may further delay their plans to be a leading Latin American oil exporter this decade.

When Lucio Gutierrez became Ecuador's president last February, he predicted oil revenues from a new $1.4 billion pipeline would help heal his country's economy. Eight months later, an international consortium began moving 180,000 b/d of heavy oil from the Oriente basin. But years may pass before the 450,000 b/d capacity pipeline fills.

Promises unmet
Foreign oil companies recently walked away from a proposed oil auction because some royalty rates exceeded 50%. Meanwhile, Ecuador's Congress continues to resist Gutierrez's pleas to pass a hydrocarbon law and promote tax reforms.

But what really has officials worried is a multibillion-dollar civil lawsuit against ChevronTexaco over alleged environmental abuses in the country's Amazon rainforest region.

Energy Minister Carlos Arboleda Nov. 7 said the lawsuit "is, effectively, an obstacle or negative element," reported the Associated Press. He also suggested the suit is without merit because Ecuador absolved ChevronTexaco predecessor Texaco Inc. of liability in 1998 after the company performed a $40 million cleanup. Texaco merged with Chevron Corp. in 2001.

Environmental lawsuit
Environmentalists argue that investors should welcome the trial because it shows the rule of law is being enforced.

"ChevronTexaco has created an atmosphere of suspicion that needs resolving," said Amazon Watch's Shannon Wright. "In many ways the company has increased liability for other companies wanting to invest."

The decade-old suit, first filed in US courts, alleges that Texaco illegally dumped 18.5 billion gal of toxic wastewater and crude during 1964-91. Years of legal wrangling followed, and in August 2002 a US Circuit Court of Appeals in New York ruled the case should be in Ecuador; now ChevronTexaco is on trial in tiny Lago Agrio, about 106 miles northeast of Quito.

Some of the US lawyers representing the plaintiffs allege the company owes $6.5 billion in environmental cleanup and healthcare costs; ChevronTexaco says the figure is baseless. Company spokesman Rodrigo Perez said that when the company cross-examined Rene Vargas, a former energy minister, Vargas conceded he signed letters "demonstrating direct knowledge and approval of the ministry's close management of the oil consortium," contradicting plaintiffs' claims that as minister he had no such knowledge.

Meanwhile, ChevronTexaco opponents are looking to win in the court of public opinion.

Amazon Watch organized a fact-finding delegation that visited the region the same time the presiding judge looked at disputed oil fields. The group includes religious and labor leaders from the company's hometown of San Ramon, Calif. A press conference is expected this week.

Financial analysts, meanwhile, are more upbeat than Ecuadorian officials about the situation. The consensus is that even if the judge rules against ChevronTexaco, it will stall, not stop future oil concessions. And the International Monetary Fund is not expected to pull out because it fears an unstable Ecuador could turn into the next Bolivia.

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