Occidental Petroleum 2001 Annual Report Download - page 73

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Occidental in 2004 by paying approximately $30 million to Occidental and, in
connection with this transfer, require Occidental to assume Marubeni's guarantee
of OxyMar's debt. If Occidental acquires the Marubeni interest, it will
consolidate OxyMar. If OxyMar were to be consolidated, its assets, including the
VCM facility, and its liabilities, including debt to third parties, would be
recorded on Occidental's consolidated balance sheets. As of December 31, 2001,
Occidental had advanced $144 million to OxyMar and had a net equity investment
of $52 million.
Occidental and Conoco Inc. (Conoco) each has a 50-percent interest in
Ingleside Cogeneration Limited Partnership, a limited partnership (Ingleside
LP), which operates a cogeneration plant in Texas. The cogeneration facility
supplies all of the steam and electric power requirements to Occidental's
Ingleside chlor-alkali plant and the VCM plant Occidental owns with Marubeni, at
less cost than if these facilities were to produce their own steam and purchase
electric power from a public utility. At December 31, 2001, Ingleside LP had
approximately $178 million in debt, which is secured by its assets. Occidental
has not guaranteed this debt; however, Occidental and Conoco currently each
guarantee half of a debt service reserve amount of approximately $8.5 million.
Occidental accounts for this investment using the equity method.
61
In Ecuador, Occidental has a 12-percent interest in a company currently
constructing a pipeline, which is expected to be completed in 2003. Construction
of the pipeline has made it feasible for Occidental to begin developing the Eden
Yuturi field it discovered several years ago in the southeastern corner of Block
15. The development of Eden Yuturi, together with ongoing work in the western
portion of the block that is currently in production, is expected to add net
incremental production of 30,000 barrels per day, all of which is expected to be
shipped through the new pipeline. Occidental has committed to make capital
contributions up to its share (approximately $148 million) of the estimated
total project costs, less an equivalent percentage (up to approximately $110
million under existing financing arrangements) of any senior project debt
incurred by the pipeline company. The pipeline company's senior project debt is
to be repaid with the proceeds of ship-or-pay tariffs of certain upstream
producers in Ecuador, including Occidental. Under their ship-or-pay commitments,
Occidental and the other upstream producers have each assumed their respective
share of project-specific risks, including construction risk, operating risk and
force-majeure risk. Under certain circumstances, Occidental could be required to
pay an advanced tariff payment that would in turn be used by the pipeline
company to service or prepay project debt. As of December 31, 2001, Occidental
has contributed $9 million to the company. Occidental reports this investment in
its consolidated financial statements using the equity method of accounting.
Occidental and Sempra Energy (Sempra) each has a 50-percent interest in Elk
Hills Power LLC, a limited liability company that is currently constructing a
gas-fired, power-generation plant in California. Occidental accounts for this
investment using the equity method. In January 2002, Elk Hills Power LLC entered
into a $400 million construction loan facility. Occidental guarantees $200
million (50 percent) of the loan facility. At January 31, 2002, approximately
$94 million of the $200 million guarantee was outstanding.
Occidental has entered into an indemnity agreement with Equistar, its
29.5-percent equity investee, to contribute to Equistar an amount equal to the
lesser of approximately $420 million or the principal amount of Equistar's notes
due 2009 then outstanding, together with interest. At December 31, 2001, the
outstanding principal amount of Equistar's notes due 2009 was almost $600
million. Occidental is only required to pay this amount to Equistar if the
holders of the notes have not been able to obtain payment after having pursued
and exhausted all their remedies to compel payment by Equistar, including the
liquidation of assets. The indemnity expressly does not create any right in the
holders of the notes or any person other than Occidental, Equistar and the
partners of Equistar. Occidental may elect to terminate the indemnity in certain
circumstances.
NOTE 15 INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS
--------------------------------------------------------------------------------
Effective January 1, 1998, Occidental adopted the provisions of SFAS No.
131--"Disclosures about Segments of an Enterprise and Related Information."
Occidental has identified two reportable segments through which it conducts its
continuing operations: oil and gas and chemical. The factors for determining the