Petrobras Accused Of Oil Contract Breach In Ecuador
Friday, April 04, 2008

Ecuadorian state oil company Petroecuador said that Petrobras may have breached its contract by selling assets to a third party and that, if so, the Brazilian state energy giant could be stripped of its main Amazon oil concession.

Petroecuador chief Fernando Zurita told the press Thursday that he asked the Oil and Mines Ministry on March 31 to begin a termination process at Block 18, which is operated by a Petrobras subsidiary.

Zurita said he took that step after a probe by Ecuador's Attorney General's Office revealed that Petrobras breached its contract by transferring a 40 percent stake in that block to Japan's Teikoku Oil without informing the government.

Petrobras, for its part, said it duly informed authorities of the sale and did not commit any violation.

In a statement released Thursday, the oil giant said that it was notified of the start of the termination process and that "it sees this action as another opportunity to demonstrate the legality of all its activities" in Ecuador.

The Brazilian state company said it will present "all the information that the relevant authorities in the country require."

After Petrobras responds to the charges, a final decision on whether or not to end the company's contract will be made by the Oil and Mines Ministry, Zurita said.

In March 2006, the Ecuadorian government revoked the concession of U.S.-based Occidental Petroleum's after the firm transferred assets without informing authorities in Quito.