Two people fish in a river at the Amazon. In the photo below an oil well in the Amazon jungle. (PHOTO BY ORSETTA BELLANI)
The Special Committee for Hydrocarbon Tenders (COLH) of Ecuador decided to postpone to July 16 the completion of the XI Oil Round, scheduled for May 30, 2013. With the XI Oil Round, the South American government seeks to tender 13 blocks in the South East of the country, in the Amazonian provinces of Pastaza and Morona Santiago, through contracts to be subscribed in the last quarter of the year.
The bid submitted by the Correa government in Colombia, United States, France, Canada and China, Ecuador’s main trading partner and which whom Ecuador holds a debt of about 9,600 million dollars. This way, Correa opens the exploitation of the subsoil of the southern area of the Ecuadorian Amazon – which has the fifth largest oil reserves in South America – to foreign companies.
According to Osvaldo Leon, coordinator of the Latin American Information Agency (ALAI, based in Quito), the negotiations include new features compared to previous governments.
“Correa changed the orientation in economic management, which aims to strengthen South-South relations”, said Osvaldo Leon to El Reportero de San Francisco. “For example, agreements with State majority companies from the South are privileged, and hence some transnational oil companies have filed claims to the ICSID (International Centre for Settlement of Investment Disputes, a World Bank institution created to resolve conflicts in foreign investment).
Oil well in the Amazon jungle. (PHOTO BY ORSETTA BELLANI)Whenever there is a bid, State-majority companies have a more preferential level as long as they ensure transfer of know-how, while prior contracts did not provide for any transfer of technological knowledge. For example one of the key relationships of the Ecuadorian government is with the Brazilian oil company Petrobras, 51 percent State-owned. It’s a very strategic relationship, as the carioca country has great specific weight in the region: the National Development Bank of Brazil has more than 55 percent of the investments in development of South America.”
The impact of oil extraction on the environment and the social fabric of communities concern indigenous peoples and environmentalists from around the world. During his world tour, the Ecuadorian government had to face protest actions in several cities, including Houston, Paris, Beijing and Calgary. However, the strongest rejection to the 11th Oil Round comes from indigenous peoples, who declared to be in a war state.
“We decided not to allow the entry of extractive companies to conduct mining activities in our territory”, announced the President of the Shuar Federation of Pastaza, Christopher Jimpikit. “We declare the state of high alert against the plans of the companies to enter our communities.”
According to the government newspaper El Ciudadano, the companies that are granted the operating license of the new blocks will have to make a minimum mandatory investment (in total about 115 million dollars) for the economic and social development of the communities in those areas. This money will not be managed by the oil companies, but it will be given to the State, who will invest it in projects agreed with communities. In fact, in 2010, with the reform of the Hydrocarbons Law and the Internal Tax Regime, it was established that 12 percent of the profits of private oil companies and 12 percent of the surplus of public oil companies should be allocated to works that would benefit those affected.
However, the indigenous peoples of the Amazon and environmentalists do not believe that the promised works can actually compensate for the damages, and that oil extraction can be developed without seriously affecting the environment.
“The Amazon represents over 30 percent of the territory of Ecuador, but less than 10 percent of the Ecuadorian population lives there”, Ermel Chavez, leader of the Front for the Defense of the Amazon tells El Reportero.
“Therefore perhaps most of the Ecuadorian people are in favor of oil exploration, which actually favor the construction works due to the money that comes from the royalties, but those who live here have everything to lose. The government’s oil policy is confusing: it speaks of nature conservation but at the same time it wants to tender new blocks, saying that modern technology that will not affect the environment will be used. However, in practice there is no oil extraction that doesn´t contaminate the environment”.
The contradiction Ermel Chávez highlights is clear. In his presidential campaign in February, Rafael Correa proposed a change in the country’s energy matrix. Jorge Glas, Minister Coordinator of Strategic Sectors of the South American country – where oil accounts for the largest export product – said that in 2016 the hydroelectric plants now under construction will provide the country with 93 percent of its needs.
This conservative attitude seems to clash with the bid for 13 oil blocks and the declaration of Wilson Pastor, Minister of Non-Renewable Natural Resources, who said that in the last three years there have been efforts to increase oil production, which in 2013 reached 525mil barrels per day.
However, even if Ecuador expands its oil border to the South East, it will exhaust its oil reserves in just over ten years, according to data provided by researcher Fernando Villavicencio Valencia. The change in the energy matrix for Ecuador appears to be a forced choice.
