Ecuador signs oil deal with China

Ecuador signed a deal to export some 3 million barrels of crude oil to China through the Petrochina company, with the Andean country to receive $1 billion as an advance payment, the statal Petroecuador announced July 23. The first payment represents 28% of the total value of the oil that Ecuador has agreed to export. Ecuador produced over 485,000 barrels of crude oil per day in May. Quito is also negotiating a $1 billion loan with China, economic minister Diego Borja said earlier this week. (Reuters, July 23)

President Rafael Correa also said July 23 that Ecuador will defy a World Bank arbitration body if it rules in favor of the Paris-based oil company Perenco in a dispute over $357 million in taxes. “We are willing to take this to its ultimate consequences with Perenco. We are not going to let these multinational companies continue to treat us like colonies,” Correa told Quito-based Sonoram radio. (AP, July 23)

China’s Andes Petroleum already has operations in the Ecuadoran Amazon. Correa has also broached opening the Manta air base on the Pacific to China as a shipping hub after US military forces vacate the site later this year.

Amazon indigenas protest Correa
Meanwhile, the Confederation of Indigenous Nationalities of the Ecuadorian Amazon (CONFENIAE)—composed of the Siona, Secoya, Cofán, Waorani, Shuar, Achuar, Shiwiar, Kichwa, Ando and Zápara nationalities—charging that “the prevailing arrogant and dictatorial political regime of the current Government of President Correa, violates the precepts of Constitutional Rights of the Republic, the principles of the ILO Convention 169, and the rights affirmed in the United Nations Declaration on the Rights of Indigenous Peoples.”

The statement further protested that “the regime of Rafael Correa is provoking political and social disorder in the Amazon Region, disregarding Ancestral Territorial Rights of Indigenous Nationalities and Peoples, by the intrusion of military forces and surrender to the national and transnational oil and mining companies of our territories, with a clear plan to [bring about] the looting, subjugation and misery of our communities.” (Upside Down World, July 15)

The statement especially rejected Correa’s Decree 1780 of June 25, which grants Catholic missions access to Ecuador’s Amazon region, to evangelize and establish schools and radio and TV stations. (El TelĂ©grafo, Guayaquil, July 15)

See our last posts on Ecuador, China in Latin America, and Perenco and the struggle for the Amazon.

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  1. Correa to renegotiate trans-Andean pipeline
    President Rafael Correa has announced that his government will renegotiate a contract with shareholders of the trans-Andean OCP pipeline because they have been evading taxes. “We’re going to tell these people (OCP’ shareholders) that they are stealing from the Ecuadorian state,” he said in his weekly radio address. “We’re going to renegotiate the OCP contract.” According to Correa, the OCP owners have evaded hundreds of millions of dollars of taxes and the government is “no longer going to allow that.”

    According data from the Internal Revenue Service, or SRI, the OCP consortium paid about $3.2 million in taxes between 2007 and 2008. OCP officials declined to comment. The OCP’s shareholders are Occidental Petroleum, Spain’s Repsol, Brazil’s Petrobras, the French Perenco; Italian ENI and China’s Andes Petroleum. Andes Petroleum stake is held by the China National Petroleum Corp. and Sinopec Overseas Oil and Gas Ltd.

    The OCP’s shareholders operate under take-or-pay contracts, where they must make payments regardless of how much oil is transported. Under the terms of the contract, the OCP is to become state property after 20 years of operation, which started in 2003.

    OCP is one of the Andean nation’s two main oil pipelines. The 503-kilometer pipeline transports heavy crude from the Amazonian oil fields to the port of Esmeraldas, in the coastal region. Although it has capacity to transport 450,000 barrels per day, the OCP currently transports around 130,000 bpd. The $1.4 billion-pipeline provides the country with an alternative to the SOTE, an older, state-owned pipeline that transports a lighter form of crude. (Dow Jones, July 13)

  2. Ecuador to pay $374M to oil company Perenco

    Ecuador’s government said June 1 that it will pay the $374 million award granted to French oil company Perenco, following the country’s failure to have the arbitral award annulled.

    In 2008, Perenco sued the Ecuadoran government over a new law implemented by then-president Rafael Correa at a time of surging oil prices. The law reserved up to 99% of income from crude sales in excess of a certain level for state coffers. Perenco claimed that the law breached Ecuador’s international obligations under the France-Ecuador Bilateral investment treaty, which obliges both countries to protect the investments of nationals of the other state.

    In 2019, an arbitral tribunal of the International Centre for Settlement of Investment Disputes (ICSID) agreed with Perenco and had ordered Ecuador to pay the company more than $450 million in damages. Ecuador appealed the decision to the Annulment committee of the ICSID, which rejected Ecuador’s application to annul the award, but instead reduced the damages awarded from $450 million to $412 million.

    In a communique, the Solicitor General’s office of Ecuador said that the ruling by the annulment committee was definitive and that it was not appealing the decision. It also stated that the Ecuadoran state would resume talks with Perenco in order to reach an agreement on the form of payment.

    The current case is similar to Ecuador’s settlement with the US company ConocoPhillips after the latter was awarded $380 million by an ICSID arbitral tribunal. (Jurist)