Ecuador abandons deal to keep Amazon oil in the ground
Ecuador’s president Rafael Correa said this week that his government is pulling out of a deal to keep oilfields in an environmentally sensitive swathe of the Amazon untouched
In a nationally televised speech announcing his decision to scrap the Yasuní-ITT initiative, Correa lashed out at rich countries for failing to provide cash promised in 2007 to fund the programme. “Let no one be fooled, the fundamental reason this failed is because the world is hypocritical,” Correa said. “Unfortunately, we have to say that the world failed us.”
Concern that the programme was in jeopardy had been mounting in recent months among the initiative’s backers as funding failed to materialise.
The UN-backed Yasuní-ITT initiative was a pioneering climate change agreement in which governments and environmental groups from around the world said they would pay Opec member Ecuador not to develop a major oilfield.
In exchange for not developing the Ishpingo-Tiputini-Tambococha (ITT) oilfield, which sits in the Yasuní National Park, backers of the scheme pledged to pay Ecuador $3.6bn, half the value at the time of the field’s 920m barrels of oil reserves. When the agreement was announced, the field accounted for nearly a quarter of the country’s proved reserves, though recent reserves upgrades means it now makes up about 11% of reserves.
The initiative has struggled for years. It was formulated just prior to the onset of the global financial crisis and established in 2010 at the height of the developed world’s economic woes. Austerity measures put in place by the programme’s most important backers in Europe – the US was not a strong supporter of the deal – have left little money left over for the programme. Correa said that just $13.3m had been deposited in the Yasuní-ITT trust, less that 1% of the expected funds.
There was also some mistrust by some governments over Correa’s handling of the programme’s funds. He had pledged to spend money set aside in the on clean energy development, protection of the Yasuní National Park and support for indigenous communities in the region. But there were no formal accountability measures in place to control how the funds were spent. Others were concerned that Correa or a future government could go ahead and develop the oilfields anyway.
Correa said that the oil reserves at the ITT field were an important source of wealth for the country and could not be ignored. He said that new technology made available in recent years to develop the field’s extra-heavy oil reserves meant it was now worth more than $18bn. "We have a clear conscience. Yasuní-ITT has been the most serious and concrete proposal in the fight against climate change, but we need to ensure the livelihoods of our people, especially the poorest,” Correa said.
The announcement comes as Ecuador tries to drum up new investment for its oil sector. The country has put 13 blocks in the southeastern Amazonian region up for bidding. The original deadline for bids was 30 May, but that has been delayed to 28 November.
State-run Petroamazonas will take over as operator of the ITT field, but the company will likely need help developing the field. Western investors have largely avoided new investment in Ecuador’s oilpatch since Correa reformed the country’s oil contracts in 2010.
Petroamazonas could instead turn to a foreign state-owned oil company. It works with Venezuela’s PdV on a nearby heavy-oil field, but the Venezuelan company is likely too financially strained with its commitments at home to take on a major new project. One of China’s state-run companies would be a more likely candidate. China has deepened its ties with Ecuador’s energy industry over recent years. It has offered the country billions of dollars in oil-for-loans deals and promised investment in a major new refining project, seen as a crucial strategic investment by the Ecuadorian government.