ICBC contributes to $520 million syndicated loan to expand Cerro Dragon block and Lindero Atravesado block (linked to Project ID#92307 and Project ID#92496)

On July 30, 2015, the Argentine branch of Pan American Energy (PAE) signed a $520 million syndicated loan contract to finance part of the company’s investment program in exploration and production of oil and gas in Argentina. The loan was organized by the International Finance Corporation (IFC ID number 36146) and has two tranches. Tranche A is $120 million from the IFC with a 6.83 year maturity (final maturity June 2022). Tranche B is $400 million with a 4.83 year maturity (final maturity June 2020). Both tranches had a variable interest rate based on the six-month LIBOR, plus an unknown margin. The Industrial and Commercial Bank of China (ICBC) contributed an estimated $57,142,857.14 to Tranche B. Other contributors to Tranche B included Itaú BBA, Natixis, Santander, Banco Latinoamericano de Comercio Exterior (Bladex), BBVA, and Credit Agricole. The loan is guaranteed by Pan American. As of December 31, 2019, the outstanding balance on the loan was $104.5 million. PAE, which is Argentina’s second largest hydrocarbons producer, was to use the loan proceeds to support its $1.5 billion expansion program in the Cerro Dragon block in the San Jorge Gulf off southern Patagonia (which had been the center of a violent labor dispute in 2012) and the Lindero Atravesado block in Neuquen. The engagement encompassed activities related to drilling, secondary recovery, facility expansions, improvements, and parts of the 2015/2016 investment program to support increased oil and gas production. Prior to this, ICBC also contributed to a syndicate organized by the Development Bank of Latin America (Corporacion Andina de Fomento, CAF) in 2014. That loan's purpose was also to partially finance the expansion program in the Cerro Dragón block, and it is captured via Project ID#92496. Then, in September 2020, the Office of the Compliance Advisor/Ombudsman (CAO) received a complaint regarding the both the IFC loan to this project (IFC ID number 36146) and their participation in a syndicated loan to PAE in 2019 (IFC ID number 42169), which also included ICBC participation and is captured in Project ID#92307. The complaint was from a former worker of one of PAE´s former contractors in Cerro Dragón, on behalf of himself and approximately ten other former workers of the same and other contractors. The Complainants allege that PAE has deprived them of their right to work by unfairly accusing them in court of actively participating in a violent seizure of the Cerro Dragón oil filed in 2012. As a result, they believe they are entitled to economic compensation and allege that the Company has failed to honor an out-of-court settlement agreement stating that the Complainants are entitled to compensation. The Complainants did not request confidentiality. The Complainants stated they were unfairly cited (and in some cases, indicted) in criminal court proceedings initiated by PAE for a violent seizure of the Cerro Dragón oil field in 2012, operated by PAE. The Complainants claimed that they were not involved in the violent incidents that took place in 2012, but that PAE’s contractors nevertheless laid them off at the request of PAE. The Complainants additionally claimed that because of the criminal court proceedings and the violent incidents from 2012, PAE labelled them as ‘terrorists’ and thereafter, no other company in the oil and gas sector in Argentina would hire them. They alleged that, as a result, PAE has deprived them of their right to work for the past eight years, and they believe they are entitled to economic compensation for the years during which they have not been able to access jobs. The Complainants also alleged that they signed out-of-court settlement agreements with PAE in 2019 (amended in 2020), whereby PAE agreed to pay each Complainant the sum of ARS $12 million (USD $120,000 approx.) in compensation for affecting their right to work as a consequence of the criminal court proceedings they were involved with, related to the 2012 seizure of the Cerro Dragón oil field. The Complainants informed CAO that they were approached and allegedly represented by a lawyer called María Duffey Laxague in the process of the signing the out-of-court settlements, but believe she later turned on them and partnered with PAE in bad faith to deceive them. The Complainants stated that that payments stipulated in the agreement were not met by PAE. The Complainants have also expressed distrust regarding PAE’s allegations that no such dealings with the lawyer exist and that legal action for fraud has been filed against her by the Company. The Complainants informed CAO that they had sent PAE a letter (cartadocumento) as a formal notification of their intention to pursue legal action if PAE does not pay the economic compensation that they believe they are entitled to. Nonetheless, they have expressed their willingness to address the issue of the complaint through dialogue under the auspices of the Dispute Resolution function of the CAO. PAE stated that the violent incidents in the Cerro Dragón oil field in 2012 were an unprecedented attack on private property. Following the violent incidents, several individuals, including the individual who filed the complaint, were prosecuted by the State in criminal courts (not by PAE). PAE also shared that it is not their policy or practice to label or retaliate against former workers of its contractors, or anyone. They stated that the violent seizure of the oil field Cerro Dragón in 2012 is public knowledge for everyone in the industry and there is an ongoing criminal judicial proceeding before the Federal Courts in Comodoro Rivadavia, in the Province of Chubut in relation to the seizure. They also stated that PAE did not have any influence on the Complainants’ alleged inability to access jobs. PAE additionally rejected the Complainants’ claim that economic compensation was due to them. PAE stated that they had not entered into an out-of-court settlement agreement with any of the Complainants. The Company claimed that the alleged out-of-court settlement agreements were fraudulent and were forged by the Complainants’ lawyer María Duffey Laxague. As a result, PAE has taken legal action against the lawyer for the crimes of fraud and falsification of public 8 documents, currently before Criminal Court nbr. 54 (Juzgado Nacional en lo Criminal y Correccional Nro. 54), under court proceeding nbr. 24.082/2020 (“Imputada: Duffey Laxagüe, María Auxliadora s/ Estafa procesal, defraudación por contrato simulado, falsificación de documentos públicos, y uso de documento falso o adulterado (art. 296 Código Penal)”. The court's jurisdiction has been confirmed in the City of Buenos Aires, and PAE has appeared before the court as the plaintiff (parte querellante).

Additional details

1. The ICBC contribution to a subsequent loan syndicate involving the IFC to PAE for an infrastructure project, the Campana Refinery Upgrading Project, is captured in Project ID#92307. It was also included in the CAO complaint. 2. The size of ICBC’s contribution to the $400 million syndicated loan tranche is unknown. For the time being, AidData assumes equal contributions ($57,142,857.14) across the 7 known members of the loan syndicate tranche. 3. The Office of the Compliance Advisor/Ombudsman (CAO) is a recourse mechanism for projects supported by the International Finance Corporation and Multilateral Investment Guarantee Agency of the World Bank Group. It was established in 1999 and is based in Washington, D.C. 4. Pan American Energy is a leading global multi-source energy company. In 2017, the company’s shareholders —Bridas Corp. (40%) and BP (60%) — consolidated their interests in Pan American Energy and AXION Energy to form a single company called Pan American Energy Group. Bridas Corp. is now known as BC Energy Investment Corp., and is 50% held by Bridas Energy Holdings Ltd. and 50% held by China National Offshore Oil Corporation (CNOOC). Today, Pan American Energy (PAE) has positioned itself as Argentina’s largest private producer, employer and investor in the energy industry and conducts operations in Argentina, Mexico, Bolivia and Uruguay. PAE’s operations span the upstream, midstream and downstream operations and thermal and renewable electric power sectors of the energy business. In the downstream business, PAE operates the Campana Argentina refinery. As for its retail operations, the company sells fuels through the brand AXION Energy and lubricants through the brand Castrol, in its 740 gas stations in Argentina and Uruguay. Axion presently has a 15% share of the Argentine fuels market. The company currently explores and produces oil and gas in Argentina, Bolivia and Mexico in conventional and unconventional reservoirs, both onshore and offshore.

Number of official sources

5

Number of total sources

20