Argentina’s Supreme Court revoked the seizure of Chevron Corp.’s (CVX) assets in the country six months after an embargo that threatened to derail plans to develop shale deposits with state-run YPF SA. (YPF)
The embargo was rejected in a five-page ruling, overturning a November decision by Judge Adrian Elcuj Miranda ordering 40 percent of Chevron’s Argentine bank accounts to be held in escrow at the request of Ecuadorean plaintiffs to enforce a $19 billion award against the second-biggest U.S. oil company, according to the ruling posted late yesterday on the Supreme Court’s website.
The “decision from Argentina’s Supreme Court confirms that the Ecuadorian embargo should not have been issued in the first place,” James Craig, a spokesman for San Ramon, California-based Chevron, said yesterday in an e-mailed response to questions. “This is a significant development further demonstrating the illegitimacy of the Lago Agrio Plaintiffs’ attempt to enforce their fraudulent judgment.”
Ecuador has blamed Texaco Inc. (677004Q), which Chevron acquired in 2001, for destroying the environment in the Lago Agrio region through its oil exploration activities and damaging the living conditions of 30,000 inhabitants. The Ecuadorean plaintiffs filed the attachment order in Argentina under an international treaty signed by Ecuador, Argentina and Colombia.
“We respectfully disagree with the ruling,” Enrique Bruchou, the Argentine lawyer for the Ecuadorean plaintiffs, said in an e-mailed statement. “The trial court, a unanimous Court of Appeals, and especially senior Judge Carlos Fayt in his dissent, all appreciated, Chevron’s Argentine subsidiaries do have the right to be heard in Ecuador. We will continue pursuing the defense of the rights of the Ecuadorean plaintiffs against the Argentine subsidiaries of Chevron.”
The Ecuadorean plaintiffs rights to sue Chevron’s Argentine units haven’t been affected by this ruling, which refers exclusively to a precautionary ruling for the seizure of assets, Bruchou said. The Ecuadorean plaintiffs filed the attachment order under an international treaty signed by Ecuador, Argentina and Colombia.
The ruling unfreezing Chevron’s accounts paves the way for a $1.5 billion venture between Chevron and YPF (YPFD) to develop shale oil and gas at what may be the “the world’s second-largest shale oil reservoir,” according to Ali Moshiri, Chevron’s head of Latin America and Africa.
Chevron, the fourth-largest producer of oil in Argentina, signed an accord on May 15 establishing terms for a definitive agreement with YPF (YPF), Argentina’s biggest energy company, to develop an area at the shale formation of Vaca Muerta. The total investment in the venture could reach $15 billion.
Any deal to work with YPF in exploring the nation’s shale formations must be preceded by a lifting of the embargo on Chevron’s assets, Chairman and CEO John Watson said on March 12.
Alejandro Di Lazzaro, a spokesman for YPF in Buenos Aires, declined to comment in a telephone call.
YPF has struggled to proceed with plans to tap non-conventional oil and gas deposits in Argentina to boost output a year after President Cristina Fernandez de Kirchner seized a 51 percent stake in the company from Spain’s Repsol SA.
YPF increased energy imports this year after a fire in April at its largest refinery in La Plata lowered output levels. The company has been shut out of international capital markets because of double-digit borrowing costs for Argentine issuers.
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