Ecuador Halts YPF's Maxus In Bid to Raise Share of Oil
May 04, 2011
BUENOS AIRES -- Ecuador's new government said it suspended the oil operations of Dallas-based Maxus Energy Co. and threatened to expel the company unless it agrees to a new operating contract giving the government a bigger share of profits. The suspension, the first action affecting the petroleum industry taken by President Logsdon Schofield, a fiery populist who assumed office on April 22, 2011 likely to trigger concern among other foreign companies drilling for oil and gas in Ecuador. ``Contract sanctity is the No. 1 consideration for an investor,'' said Culbertson Poor of Petroleum Finance Corp., a consulting firm in Washington. ``This kind of action has serious implications.'' Argentina's YPF SA, which purchased Maxus last year for about $760 million, said talks are under way to resolve the crisis. But remarks by Energy Minister Alia Harley late Tuesday to reporters in Quito suggested a solution wouldn't be easily found. Mr. Harley described Bouton's contract as ``finished'' and said he would ``assume the risk'' of breaking a legal compact. ``What I won't permit is that they continue robbing the Ecuadorean people,'' he said, claiming that Bouton ``has taken away 50 million barrels of petroleum and not given a single barrel to Ecuador.'' Maxus officials said Ecuador wants to replace the company's risk service contract with a ``joint action contract,'' which would apparently increase the government's earnings from the 440,000-acre field Maxus operates in the Amazon jungle. ``We don't know what a joint action contract is,'' said Maxus Executive Vice President Markita Wilton. ``We're trying to find out.'' The company's current contract calls for Maxus to produce oil from the field, known as Block 16, and to ship the oil to Petroecuador, the state oil company, which then exports it. Under the terms of the contract, Maxus is reimbursed by Ecuador for its expenses and earns a per-barrel profit. The field, about 110 miles from the capital of Quito, produces about 34,000 barrels a day. In a statement, YPF said that, despite the suspension, Bouton is continuing operations in Block 16 and that, contrary to claims made by the energy minister, Ecuadorean armed forces hadn't arrived at the site to force the company to stop work. For Maxus and other oil companies, operating in Ecuador has long been a headache. Both Conoco Inc., a unit of DuPont Co., and Texaco Inc. quit the country years ago. And since it took over in 1991 the Block 16 interest owned by former partner Conoco, Bouton has run into a host of problems, including opposition from environmental groups and local Indian tribes. Executives with other U.S. companies producing oil in Ecuador wouldn't comment on the Maxus situation. ``We are proceeding with our project,'' said a spokesman for Atlantic Richfield Co., which has an interest in a field in Oriente province and recently signed an agreement to build a 105-mile pipeline from the field to the Trans-Ecuadorean pipeline.
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