Chevron says embargo compromises operations in Argentina
Taos Turner, Dow Jones Newswires
BUENOS AIRES - Chevron Argentina, the local subsidiary of Chevron Corp., said Thursday its operations in the country have been compromised by an embargo related to a decades-old legal dispute in Ecuador.
In a full-page ad placed in Argentina's leading newspapers, Chevron Argentina said the claims against it have no legal foundation and that the embargo of its local assets will have broader consequences for the entire country.
"The judicial embargo compromises Chevron's capacity to operate and reinvest given that the order affects more than 90% of its income through crude sales," the company said in the ad.
Earlier this month, two local Chevron subsidiaries filed an appeal seeking to overturn an embargo on up to $19 billion of Chevron's assets and receivables in Argentina.
The motion came just days after a local judge ordered the embargo as part of a legal dispute involving claims that Chevron is responsible for environmental contamination in Ecuador. An Ecuadorian court ruled in favor of the plaintiffs, ultimately awarding them $19 billion. Chevron denies the allegations and said the ruling is based on fraudulent evidence. Plaintiffs have said that the fraud accusations are invalid.
"Chevron Argentina never had operations in Ecuador and it has no relationship whatsoever with the fraudulent suit in Ecuador," the ad said.
The local embargo applies to 100% of Chevron's capital in Argentina, 100% of dividends, all of Chevron's stake in pipeline operator Oleoductos del Valle SA, 40% of Chevron's oil sales to Argentine refineries and 40% of the money Chevron has or may eventually have in Argentine banks.
The order states that the embargo will remain in place until the Ecuador award is paid off in full.
Enrique Bruchou, lead attorney for the plaintiffs in Argentina, has estimated Chevron's assets in Argentina at around $2 billion and said they produced around $600 million in crude in 2010. The value of that annual production could be embargoed every year until the legal claim is settled, according to Mr. Bruchou.
Chevron doesn't have significant assets in Ecuador, so the plaintiffs have been trying to seize its assets in other countries to enforce settlement on the judgment.
The Argentine embargo order cited a treaty between Argentina and Ecuador that allows judges in one country to enforce court orders from the other country.
In the ad, Chevron appealed to Argentina's desire to regain self-sufficiency in oil and gas, saying the company's operations here make it a partner in this goal.
"Chevron Argentina has operated in the provinces of Neuquen and Rio Negro for decades and this year it has reinvested all of its income in growth opportunities, including the development of unconventional hydrocarbons, a key part of the country's plans to recover its energy independence," the ad said. "The embargo order has not considered the public interest."
The embargo comes at a bad time for Argentina's state oil company, YPF SA, which is courting Chevron to help it explore for massive unconventional oil and gas resources.