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Cablegate: Ecuador Econ Weekly: Law Contract Cancelled in Oxy Case;

VZCZCXYZ0000
OO RUEHWEB

DE RUEHQT #2187 2672027
ZNR UUUUU ZZH
O 242027Z SEP 07
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7795
INFO RUEHBO/AMEMBASSY BOGOTA PRIORITY 6920
RUEHCV/AMEMBASSY CARACAS PRIORITY 2684
RUEHLP/AMEMBASSY LA PAZ SEP 0722
RUEHPE/AMEMBASSY LIMA PRIORITY 1951
RUEHGL/AMCONSUL GUAYAQUIL PRIORITY 2840
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

UNCLAS QUITO 002187

SIPDIS

SENSITIVE
SIPDIS

TREASURY FOR MMALLOY AND MEWENS

E.O. 12958: N/A
TAGS: ECON ENRG EINV EC
SUBJECT: ECUADOR ECON WEEKLY: LAW CONTRACT CANCELLED IN OXY CASE;
NEW MINING LAW PLANNED; BIDS FOR MINOR OIL FIELDS


1. (U) The following is a weekly economic update for Ecuador that
reports notable developments that are not reported by individual
cables.

OXY: Ecuador Revokes Leboeuf Contract
-------------------------------------

2. (U) Due to a conflict of interest, on September 18 the office of
the Ecuadorian Attorney General cancelled its contract with U.S. law
firm Leboeuf, Lamb, Greene and MacRae, which was to represent
Ecuador in the Occidental (Oxy) arbitration process. The move
followed a September 5 letter from Oxy to the International Centre
for Settlement of Investment Disputes (ICSID) outlining Leboeuf's
conflict of interest. Leboeuf presented the case to University of
Pennsylvania law professor Geoffrey Hazard, a leading U.S. expert on
legal ethics, who concluded that the firm's merger with Dewey
Ballantine, LLP (which represents a subsidiary of Occidental) did
pose a conflict of interest. The Attorney General's office has
filed a request with ICSID to delay proceedings until February 2008
in order to find another firm to represent Ecuador.

GOE Prepares New Mining Law
-----------------------------

3. (SBU) During a mining forum September 18, Minister of Petroleum
and Mining Galo Chiriboga announced plans to draft a new mining law
that would allow the State greater control of the sector. The GOE
has contemplated reforms to the current mining law, which does not
allow for royalties, for some time. According to Chiriboga, "the
present law is absolutely permissive; the State role is limited to
reviewing and granting requests only." In addition to increased
State participation in the sector, the Minister anticipates that a
new mining law would allow the government to charge royalties. Vice
President of the Mining Chamber, Cesar Espinoza, reported that his
chamber has not seen or been consulted on the potential new law.
With so much uncertainty over what will happen with the sector, few
companies are currently investing, even with high prices for metals.


Ecuador Restarts Bid Process for Minor Oil Fields
--------------------------------------------- ------

4. (U) The GOE restarted the bid process for Ecuador's "marginal"
oil fields (those producing 1% or less of the country's production),
a continuation of the process from November 2006. Bids on the eight
fields were being evaluated the week of September 17-21. The
private Ecuadorian-Venezuelan consortium Petrolero Amazonico has
thus far made the most bids, on seven of the eight fields. The
fields reportedly contain up to 120 million barrels of proven
reserves.

JEWELL

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