It's not easy to predict the outcome of the long-running battle over a purported environmental disaster created in Ecuador by Texaco, prior to its acquisition by Chevron
Whose mess is this?
The case was first filed in 1993 in New York by residents of the South American country's Amazon. The 30,000 plaintiffs contended that Texaco, which Chevron bought in 2001, had done severe environmental damage during the period from 1964 to 1990. As a result, the indigenous citizens had suffered severe illness and death.
At Chevron's request, the case was refiled in Ecuador in 2003, and after several years of moving along at a proverbial snail's pace, Chevron added a filing in the Permanent Court of Arbitration in The Hague, Netherlands. The company's contention was that PetroEcuador, the country's state-owned oil company -- and not Texaco -- had created the environmental mess.
Nevertheless, this past February, a $9.5 billion judgment was issued against Chevron by Ecuador's legal system. The amount was far less than the $27 billion the plaintiffs had been seeking. Then, early last month, U.S. District Judge Lewis Kaplan, sitting in Manhattan, enjoined the Ecuadorians, pending the final outcome of the case, "from advancing in any way, or receiving benefit from any action ... outside the Republic of Ecuador for recognition or enforcement of the judgment rendered against Chevron ..."
Of late, there has been a spate of communications from the plaintiffs' side essentially maintaining that Chevron is using the judge's order to take "advantage of (time) to divest itself of assets in countries that it fears would treat the Ecuadorian judgment with the respect due to a sovereign nation's courts." The company has seen fit to sell $1.7 billion in United Kingdom assets, along with making plans to jettison other assets, including those in other countries -- 174 gas stations among them.
Huh? $1.7 billion represents cleaning house for the second-largest U.S.-based oil company?
First, there clearly is a movement afoot among the major oil companies to clean up non-core assets in favor of properties that bear more promise for the future. For instance, ConocoPhillips
Almost certainly having wearied of the violent antics of Nigeria's Movement for the Emancipation of the Niger Delta (MEND), Royal Dutch Shell
You're also aware that BP
The Gorgon honcho
Further, were Chevron feeling a need to find a spot in the soup-kitchen line, it's difficult to understand how or why it would continue on with a nearly 50% position in the massive Gorgon gas project off western Australia. For what it's worth, both ExxonMobil
Despite having agreed to sell a 6.4% stake to Shell in the proposed Weatstone natural gas export facility in northeast Australia, Chevron will remain the operator in that project, with a 73.6% stake.
Back to the basics
In North America, as The Wall Street Journal detailed Friday, Chevron has rekindled its sizable presence in the Permian Basin of west Texas. The basin, which has been around figuratively since Colonel Drake drilled the first well in the U.S., is now bringing forth significant amounts of oil. For what it's worth, Chevron's 4 million acres in the play outrank the positions held by Exxon or ConocoPhillips. And Chevron will add about 20% to its capex this year, obviously in the Permian and elsewhere.
I could continue. You'll notice, for instance, that I haven't mentioned the company's activities in Canada off Newfoundland or Labrador, or its partial ownership of the Athabasca Oil Sands Project in Alberta. Nor have I repeated prior statements that Chevron is the only member of Big Oil with an upstream operation in Saudi Arabia.
But I think you get the picture: $1.7 billion may be a big deal to you and me, but to Chevron, Exxon, etc., it's a veritable drop in the bucket.