Occidental's departure from Peru barely dents its stock.

In most parts of the world, an oil company's decision to abandon a search for oil and sell holdings would hardly raise an eyebrow. It's what oil companies have done for years when their exploration doesn't pan out.

But in a South America increasingly hostile to American influence and U.S. oil companies, the pullout by Westwood-based Occidental Petroleum Corp. from Peru took on much more significance last week--at least in the court of public opinion.

The decision to sell about 6.3 million acres of land in three huge blocks in the Peruvian jungle, which was disclosed by the San Francisco-based non-profit Save the Amazon, was popularly portrayed as the oil company caving into political and environmental pressure.

Several Latin American governments, including Venezuela and Ecuador, have nationalized some oil operations and have adopted increasingly strident anti-American rhetoric in recent years, especially Venezuelan leader Hugo Chavez.

In other countries, including Peru, there's been considerable pressure from environmental and indigenous groups to try to force oil companies to clean up or scale back operations.

But while these forces may have entered into Occidental's decision at the margins, Wall Street last week took a decidedly different view. Occidental's stock fell about 1.5 percent to $49.38 after the news broke, hardly enough to dent the stock's steady upward climb over the last two months.

"The only reason this has gotten increased attention is the perceived political overtones. It's a non-core asset; whether they stayed or left was relatively meaningless," said Pavel Molchanov, an oil industry research analyst with Raymond James & Associates. "We often see this type of divestiture when there's a small scale operation in a foreign country that the company decides is not economically worthwhile."

Indeed, while Occidental has had a presence in Peru since the early 1970s, it has not had any active operations there since it sold off its drilling operations in 1999 to Argentinian oil concern Grupo Pluspetrol.

Overall, about 10 percent of Occidental's production comes from South America, down from 17 percent earlier this year before Ecuador seized the company's operations there on May 15. Occidental has challenged the seizure in international court.

But unlike in Ecuador, the Peruvian government has not given any indications it intends to nationalize oil operations. Indeed, Peru has taken a largely welcoming stance towards American oil companies, according to Molchanov.

What opposition there is to oil companies in Peru comes from indigenous tribes such as Achuar Indians and environmental groups such as Amazon Watch. At a press conference in Los Angeles last week, representatives from these two groups said they are pushing for Occidental to pay for the cleanup of its current and former holdings. Occidental maintains that Pluspetrol is responsible for any cleanup of oil drilling operations.

The company portrayed its decision to sell the three Peruvian exploration blocks as purely business as it pursues its previously announced strategy to focus more intensely on oil operations in North America and the Middle East.

"Typically, when you decide to leave blocks, you've done your valuations and you think you have better opportunities elsewhere. This goes on all the time in our industry," said Occidental spokesman Lawrence Merriage.

BY HOWARD FINE 

Staff Reporter