Ecuador veers left, but energy policy remains unclear
THE country has taken another step towards renationalisation of its oil and gas industry, with the January inauguration of leftist economist Rafael Correa as president. In his inauguration speech, Correa said he would follow a socialist model of economic development and claimed the country's natural resources have been "stolen" in the past by foreign companies. He also said Ecuador will consider re-joining Opec, which it left in 1992.
Eager to increase oil production of around 0.52m barrels a day (b/d), Correa wants to ensure a larger role for the under-funded state-owned oil firm, PetroEcuador, but is also open to the involvement of other state-run oil companies in the development of the country's reserves. Privately owned companies, Correa added, may still play a "complementary" role.
The new president of PetroEcuador, Carlos Pareja, said he will promote an alliance of PetroEcuador, PdV, Petrobras, Chile's Enap and China's Sinopec to develop the country's most promising new oil block, the Amazon-region Ishpingo-Tambococha-Tiputini (ITT), estimated to hold about 1bn barrels of recoverable oil. The project may require $5bn in investments, Pareja said.
However, it is not clear whether Correa plans any deeper nationalisation of Ecuadorian energy projects than the steps taken by his predecessor, Alfredo Palacios. Palacios soured relations between the government and the private sector in May, when PetroEcuador seized fields in the Amazon region, operated by the US' Occidental Petroleum (Oxy), which produce up to 100,000 b/d.
The government claimed Oxy sold oil assets to Canada's EnCana in 2000 without permission for the sale. Correa has made clear that the seizure of Oxy's assets will not be reversed. Oxy is seeking international arbitration to recover at least $1bn in losses related to the field seizures. PetroEcuador is running the concessions, where production has fallen by around 10% because of "technical difficulties".
Following similar changes in Venezuela and Bolivia, Ecuador also passed legislation last year to raise the tax burden on foreign oil companies still operating in the country, including China's CNPC, Repsol YPF, Agip and Petrobras.
Correa has also indicated he will attempt to encourage closer energy ties with Venezuela. PetroEcuador and PdV have already agreed a crude-for-products swap, under which Ecuador will send 36,000 b/d of Napo crude to Venezuela's Paraguana refining complex, in return for diesel supplies. PdV may also refurbish Ecuador's ageing refining complex or build a new refinery in the country.