Bernama | 6 June 2013
Argentine court revokes US$19 bln embargo on Chevron
BUENOS AIRES, June 6 (BERNAMA-NNN-MERCOPRESS) — Argentina’s Supreme Court revoked a US$19 billion embargo on the assets and future income of Chevron Corp.’s Argentina subsidiary, giving the US oil giant a victory in a decades-old battle with indigenous groups in Ecuador.
The court’s decision is also a victory for Argentina’s government, which has been encouraging Chevron to invest in its vast but almost entirely untapped unconventional oil and gas reserves.
Argentina’s state-run oil company YPF SA recently signed off on broad terms of an agreement that would see Chevron Argentina invest up to US$1.5 billion to produce shale oil in the province of Neuquen in western Argentina. If successful, the deal could rise to US$15 billion over the course of several years.
The decision comes seven months after an Argentine judge ordered the embargo, citing a treaty that allows courts in one country to uphold judgments in another.
The case stems from a 20-year-old dispute over environmental contamination in Ecuador. An Ecuadorean court convicted Texaco Inc., which Chevron bought in 2001, of contaminating parts of Ecuador’s Amazon region. Chevron denies the accusations, saying it is the victim of fraud.
Chevron doesn’t have significant assets in Ecuador, so the plaintiffs are trying to freeze the company’s assets in other countries to enforce settlement on the judgment. The plaintiffs are pursuing Chevron in Brazil, Canada and Colombia, and they have plans to file suits in other countries as well.
In a six-to-one vote, Argentina’s high court overturned the embargo on the grounds that Chevron’s local subsidiaries are separate legal entities and had not participated in the original court process, according to a copy of the ruling posted Tuesday on the Supreme Court’s media website.
The ruling removes a thorny obstacle to Chevron’s plans to invest in Argentina and seems set to make it easier for the companies to advance with the final details of an accord to develop the country’s shale oil and shale gas.
Even so, YPF still faces hurdles in attracting substantial investment in Argentina’s oil-and-gas sector. A year ago, Argentina’s government seized a 51 per cent stake in YPF from Spain’s Repsol SA and didn’t offer to pay the Spanish company anything in return. Repsol is demanding US$10.5 billion in compensation.
Argentina congress recently passed a law that makes it harder for people and companies to defend themselves against the confiscation of private property. This has increased fears that pouring money into Argentina could be risky.
Argentina has reserves of 774 trillion cubic feet of gas and 23 billion barrels of oil equivalent in Neuquen province, according to the US Energy Information Administration. But oil and gas production has plummeted due to a lack of investment, leaving the country dependent on expensive imports.