Ecuador Wary of Sharp Drop in Oil Investment

Ecuador’s government is concerned over a sharp drop in investment by private oil companies and fears that decline will continue in the coming years

QUITO – Ecuador’s non-renewable natural resources minister said Friday that the government is concerned over a sharp drop in investment by private oil companies and fears that decline will continue in the coming years.

Wilson Pastor said “oil investment has fallen from $772 million in 2006 to an estimated $490 million in 2010 and will fall, according to information they themselves (the private oil companies) have provided us, to $80 million in 2013.”

This is because the companies are not bringing in capital from abroad but only reinvesting a portion of the profits earned from their operations in Ecuador, he told the Ecuadorinmediato online newspaper.

“Oil production has fallen from 287,000 barrels per day in 2006 to 196,000 this year and will fall to 162,000 in 2013. Only taking into account the 2010-2013 period, the government will lose $3.3 billion in revenue, an average of $825 million annually,” Pastor said.

Pastor said the oil companies “have stopped … searching for new reserves, have not invested in better recovery technologies that would allow for increased production,” adding that “that’s what we’re going to demand in the new service contracts.”

He was referring to a requirement by Ecuador’s leftist government that private oil companies switch from production-sharing deals to fee-based service contracts.

Pastor noted in that regard that the companies say their drop in investment is due to concerns over a lack of clear rules of the game going forward.

The minister said 34 oil companies operate in Ecuador, the largest of which are Spain’s Repsol YPF, Italy’s Eni, Brazil’s Petrobras and Chinese consortium Andes Petroleum.

Oil is Ecuador’s main export, and revenue from oil exports finances roughly 25 percent of Ecuador’s public spending.

Source: EFE