Occidental Petroleum has decided to withdraw from a controversial project in Peru following a longstanding dispute with environmental groups and indigenous peoples that accused the US company of polluting the Amazon.
Oxy’s exit from Peru means the company “will no longer be involved in oil drilling in the Amazon for the first time in more than 30 years,” environmental group Amazon Watch said in a statement Tuesday.
The company’s departure has to be approved by the Peruvian government to become effective.
Company representatives could not be reached on Wednesday, but a company spokesman told Dow Jones earlier that the decision reflects Oxy’s growing emphasis on the US and the Middle East.
“Oxy has informed the government of Peru of our intention to cease all activities in Peru and exit the country. This decision was made for a combination of business and technical considerations, and community issues,” Larry Meriage, Oxy’s vice president of public affairs, said in the Amazon Watch statement.
Oxy’s withdrawal from three exploration blocks followed much criticism by Amazon Watch and other activist organizations as well as the Achuar indigenous peoples who live in the territories where the company was searching for oil and gas. Oxy holds exploration contracts to blocks 64, 101 and 103 in Peru.
The company’s departure is a blow to Peru’s effort to attract private investments to boost its dwindling oil production. In the past three years, the government has offered attractive exploration deals to foreign operators and has managed to draw some interest, especially in the Maranon Basin, now the center of the controversy with Oxy (OD Sep.12,p8). Government officials said earlier this year that companies have committed to invest about $2.3 billion between 2006 and 2010.
US conservation groups have lately expressed serious concerns about Peru’s extensive signing of oil and gas contracts in the world’s most pristine rainforests.
Oxy’s exit from Peru caps off a difficult year for the company in Latin America this year. In May, the government of Ecuador revoked Oxy’s operating contract after accusing the California company of illegally transferring a stake in Block 15 to Canadian EnCana in 2000 (OD May17,p1). Oxy is now seeking arbitration.
In 2002, Occidental divested some Colombian holdings following extensive protest from another tribe, the U’wa. Colombian state oil company Ecopetrol has since continued with the development in the face of continued tribal opposition.
Amazon Watch said that the government of Peru recently released a report showing high concentrations of lead and cadmium in blood samples taken from the Achuar. Amerada Hess, Talisman, Pluspetrol, Harken, Repsol YPF, Petrobras and ConocoPhillips have operations in the area.
Most of the contracts include seven years of exploration for a total term of some 30 to 40 years.
Last month, hundreds of Achuar Indians took over three producing fields jointly operated by Pluspetrol and China’s state-owned China National Petroleum Corp., claiming that pollution from oil production affected their health and contaminated their ancestral lands. The fields produce some 28,000 barrels per day. The protests led to a decline in Peru’s October oil output to an average of 106,619 b/d (OD Nov.6,p8).
