Monday, April 26, 2010

Ecuador's president appoints new oil minister

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Apr. 24 -- Ecuador's President Rafael Correa, intent on securing greater control of his country’s oil and gas wealth, has appointed Wilson Pastor to replace Germanico Pinto as minister of nonrenewable natural resources.

Pastor, who previously served as head of Ecuador’s state-owned Petroecuador in the administration of Jamil Mahuad, more recently headed up Petroamazonas, a production affiliate of Petroecuador.

Pastor’s appointment, which coincided with reports that Ecuador’s oil export revenues are dipping, followed Correa’s displeasure with Pinto’s performance in renegotiating terms with international oil companies.

Analyst IHS Global Insight said Correa’s new oil minister will be under pressure to speed up the current contract renegotiations as well as to create a more positive climate for investment in order to reverse the decline in overall production seen over the past 3 years.

According to data of Ecuador’s central bank, the country’s oil export revenue totaled $592 million in February, down 15% from $692 million in January.

In terms of volume, Ecuador exported 8.5 million bbl in February down 11% from 9.5 million bbl in the previous month. In February 2009, Ecuador exported 9.5 million bbl and obtained revenue of $252 million.

Correa apparently has cause for concern. According to one analyst, if oil revenues don’t rise soon, the government faces the prospect of increased public unrest later in the year, with the opposition already mounting ever-larger demonstrations in its coastal strongholds.

In an effort to increase revenues, Ecuador has been negotiating with IOCs to replace their production-sharing agreements with fixed-fee contracts. But the IOCs have shown no willingness to make the change, a matter of considerable annoyance to Correa.

Trying to win compliance with his demands, the Ecuadoran leader this week even threatened IOCs operating in his country with nationalization if they do not sign the new agreements.

“I am preparing a law to facilitate expropriation and nationalizations,” Correa told cable news network Telesur in an interview. “With this instrument we will do what we have to in the right moment,” he said.

Correa attempted to ease his threat by saying that even under a potential nationalization of the oil industry the seized firms would receive compensation.

“Expropriation is not the same as confiscation,” he said, adding that “they are going to receive economic compensation.”

Despite the rhetoric, IOCs remained stolid in their refusal to comply with the Ecuadoran president’s demands. “We are used to these types of pressures that aim to corner us into signing the new contracts,” said one executive.

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