June 15, 2004
ChevronTexaco and Texaco Petroleum company File Arbitration Claim to Enforce Petroecuador's Obligations under Joint Operating Agreement
Claim Asserts Petroecuador Required to Pay All Costs Associated With Lawsuit Against ChevronTexaco in Ecuador
QUITO, Ecuador, June 15, 2004 - ChevronTexaco Corp. (ChevronTexaco) and its subsidiary Texaco Petroleum Co. (TexPet) have filed a legal action to enforce their rights under the terms of a Joint Operating Agreement (JOA) and to require Petroecuador to fulfill its obligation to indemnify ChevronTexaco for any and all claims, including environmental claims, arising from TexPet's role as operator in a former oil production consortium with Petroecuador. In their claim, ChevronTexaco and TexPet assert that under the terms of the JOA, which dictates the rights and responsibilities for members of the former oil consortium, Petroecuador is responsible for all fees, costs and expenses incurred by ChevronTexaco and TexPet related to the pending litigation against the companies, including any final judgments that may be rendered against ChevronTexaco in Ecuador.
The JOA provides that any dispute between the parties that relates to the consortium is to be settled by arbitration in the state of New York in the United States, in accordance with rules established by the American Arbitration Association. The judgment of the arbitration panel will be legally binding.
In a statement made today, Ricardo Reis Veiga, vice president and general counsel, Latin America Products for ChevronTexaco, said, "We are filing this claim because to date Petroecuador has steadfastly failed to carry out its responsibilities under the Joint Operating Agreement, which is a legally binding contract."
In the claim filed on June 11, 2004, ChevronTexaco and TexPet are seeking enforcement of the JOA's requirement that:
The Parties shall indemnify and save the Operator harmless from all claims and demands which may be made against Operator by third parties due to, arising out of, or related to the performance of the Operator of its duties under this agreement. (TexPet was the operator of the consortium, and PetroEcuador was majority owner.)
Following the conclusion of TexPet's participation in the consortium in 1992, the parties agreed to divide responsibility for remediation of the sites that the consortium had operated. Having conducted its share of the environmental remediation, TexPet was fully discharged from any further liability by Petroecuador and the Republic of Ecuador, who specifically agreed to "release, acquit and forever discharge" the company from all further obligations and responsibilities. ChevronTexaco and TexPet assert that the completion of the remediation program, along with the release, fulfilled any responsibilities of TexPet for the operations formerly conducted by the consortium, which has been 100 percent controlled by Petroecuador since 1990.
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