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U.S. Oil Company Withdraws Request

October 10, 2003

By David Boddiger
Tico Times Staff

President Abel Pacheco claimed victory last week over a U.S. oil company that submitted, then withdrew, a request for international arbitration to settle a contractual dispute with the Costa Rican government over compensation for a failed oil-drilling pro-ject off the Caribbean coast.

The company, Harken Costa Rica Holdings, LLC, (HCRH) was seeking a $57-billion settlement before the Washington, D.C.-based International Center for the Settlement of Investment Disputes (TT, Oct. 3).

Last Friday, company president Brent Abadie announced the company was backing down.

"Although we had hoped to have the arbitration resolve the dispute between the parties in a fair and unbiased venue, we did not intend to cause the political turmoil that has resulted from requesting the international arbitration," Abadie stated in a letter to Environment Minister Carlos Manuel Rodríguez.

The arbitration request, filed Sept. 16 and announced in a Sept. 28 press release, stirred Costa Rica's strong anti-oil lobby into a frenzy at a key moment in negotiations between the United States and Costa Rica over a future free-trade agreement with the region (CAFTA).

Comments by Costa Rica Oil Watch representative Mauricio Alvarez, published in The Tico Times last week, directly linked the two issues. A senior administration official suggested company officials may have been pressured by unnamed U.S. officials to withdraw the request, a charge that Abadie denied this week.

"There was absolutely no pressure on me or the company to withdraw the request for arbitration," Abadie stated in an e-mail to The Tico Times. "In fact, there was no communication with any representative of the U.S. government or with any representative of the Costa Rican government until after the withdrawal."

An unannounced meeting last week between Rodríguez and former U.S. Senator Robert Torricelli on behalf of Harken Energy Corporation also raised new doubts over who actually controls the company HCRH.

Torricelli said last August that Harken Energy Corporation officials hired him to pressure the Costa Rican officials into terminating the oil contract in exchange for a cash settlement (TT, Aug. 22). The controversial former lawmaker's involvement with the company was first made known by a June 16 letter he wrote to Costa Rica's Ambassador in Washington, Jaime Daremblum, on behalf of the company.

On Tuesday, Torricelli told The Tico Times that Houston-based Harken Energy is HCRH's principal owner. The ex-Senator said that while no final settlement had come out of last week's meeting with the Environment Minister, he hoped the two sides could reach a "reasonable settlement."

However, Abadie claims MKJ Xplorations, not Harken Energy, controls HCRH. "Mr. Torricelli does not represent Harken Costa Rica," Abadie stated in an e-mail to The Tico Times. "We did not authorize any meetings between Mr. Torricelli and (Rodríguez), or any others involved with our operations in Costa Rica."

For Pacheco, the offer for good-faith negotiations was a victory.
"I anticipated that we were not willing to submit to arbitration - reason and justice were and continue to be on our side," Pacheco said. "The decision (to withdraw the request) is a triumph for reason and justice."
Rodríguez told The Tico Times that withdrawing the request was "a very good decision."

"I will reiterate our position that if the company has contractual problems, they should come to Costa Rica and resolve them through judicial and administrative means," he said.

Rodríguez insisted that the company had violated its contractual agreement to exploit oil off the Caribbean coast of Moín after the Environment Ministry's Technical Secre-tariat (SETENA) rejected a company environmental impact study last year. Abadie insists the company has followed all contractual guidelines, and that SETENA's decision was politically motivated.

Upon taking office last year, Pacheco issued a decree banning future oil drilling and open-pit mining projects. However, the decree promises to respect drilling and mining concessions that already have been granted.