Occidental Petroleum 2002 Annual Report Download - page 15

RUSSIA
In Russia, Occidental owns 50 percent of a joint venture company,
Vanyoganneft, that operates in the western Siberian oil basin. Production for
2002 was approximately 27,000 BOE per day, net to Occidental.
LATIN AMERICA
COLOMBIA
Occidental has a 35-percent net share of production and is operator of the
Cano Limon oil field in Colombia. Colombia's national oil company, Ecopetrol,
operates the Cano Limon-Covenas oil pipeline and marine-export terminal. The
pipeline transports oil produced from the Cano Limon field for export to
international markets. In addition, Occidental has an 88-percent working
interest in two exploration blocks encompassing 6,647 square miles in the
Central Llanos Basin.
In 2002, production from Occidental's Cano Limon operations in Colombia
increased substantially from 2001 due to improved security along the export
pipeline that reduced the number of attacks by local terrorist groups. The
pipeline was subjected to a record number of attacks in 2001. Occidental's net
share of 2002 production averaged 35,000 barrels of oil per day compared to
18,000 barrels per day in 2001. This operation accounts for less than one
percent of Occidental's worldwide assets, only two percent of total worldwide
reserves and less than seven percent of average worldwide oil and gas production
in 2002. Occidental presently anticipates that it will recover the proved
reserves attributable to its contract.
ECUADOR
Gross production in Block 15 in 2002, which Occidental operates with a
60-percent working interest, averaged approximately 13,000 barrels of oil per
day net to Occidental.
Full field development of the Eden Yuturi oil field in the southeastern
corner of Block 15 is complete. Full-scale production is scheduled to coincide
with the anticipated completion, in the second half of 2003, of the Oleoducto de
Crudos Pesados (OCP) Ltd. oil export pipeline, in which Occidental has a
12-percent interest. In addition, work continues in the producing areas in the
western portion of the block. The combined effect of these projects is expected
to add total net incremental production of 30,000 barrels per day to
Occidental's production profile in 2004.
In addition, Occidental is expanding its exploration activities in Block 15
with aggressive 3-D seismic and drilling programs.
In 2000, Occidental farmed out a 40-percent economic interest in Block 15
in Ecuador to Alberta Energy Company Ltd. (AEC), now EnCana. As a result of this
transaction, EnCana agreed to fund a significant portion of the capital program.
Foreign oil companies, including Occidental, have been paying Value Added
Tax (VAT), generally calculated on the basis of 10-12 percent of expenditures
for goods and services used in the production of oil for export. Until 2001, oil
companies, like other companies producing products for export, filed for and
received reimbursement of VAT. In 2001, the Ecuador tax authority announced that
the oil companies' VAT payments did not qualify for reimbursement. In response,
the affected oil companies filed actions in the Ecuador Tax Court to seek a
judicial determination that the expenditures are subject to reimbursement. In
November 2002, Occidental initiated an international arbitration proceeding
against the Ecuadorian Government under the United States-Ecuador bilateral
investment treaty based on Occidental's belief that the Ecuadorian Government is
arbitrarily and discriminatorily refusing to refund the VAT to Occidental.
Occidental believes that it has a valid claim for reimbursement under applicable
Ecuador tax law and the treaty. In the event of an unfavorable outcome, the
potential income statement effect would not be significant.
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PRODUCTION-SHARING CONTRACTS
Occidental conducts its operations in Qatar, Oman and Yemen under
production-sharing contracts. Occidental receives a share of production from
production-sharing contracts to recover its costs and an additional share for
profit. Occidental's share of production from these contracts decreases when oil