Ecuadorian government cancels controversial oil agreement

Photo: Freepik.

According to a report by AP News, the Ecuadorian government announced on Wednesday, March 9, the cancellation of an oil agreement after awarding, without a bidding process or competition, a project to a Chinese consortium to exploit the country’s largest oil field. The decision was made amid social protests and because the company failed to pay an advance valued at $1.5 billion.

This project was located in the Sacha oil field in the Ecuadorian Amazon. The preliminary agreement stipulated that the Chinese-Canadian consortium would manage the field for two decades and was required to make an initial payment of $1.5 billion.

The Sacha field is located in the province of Orellana, within the Ecuadorian Amazon, and accounts for at least one-fifth of the country’s total oil production, extracting approximately 77,000 barrels per day. Additionally, it has 50 wells spread across an area of 355 square kilometers and holds estimated reserves of 367 million barrels of oil and 96 million cubic feet of gas. This infrastructure, which is over 50 years old, is believed to be at the end of its useful life.

The $1.5 billion advance payment was scheduled for Friday, March 8. However, according to Energy Minister Inés Manzano, the amount was never received, and the deadline expired that day at 9:00 PM. The minister stated that there was nothing more to discuss, as the deadline had simply passed.

The agreement involved the Ecuadorian state and a Chinese-Canadian consortium consisting of Petrolia Ecuador, a subsidiary of the Canadian company New Stratus Energy, and Amodaimi Oil Company S.L., a subsidiary of the Chinese company Sinopec.

On Tuesday, March 8, various social organizations, labor unions, and left-wing political groups staged peaceful protests in front of the Ministry of Energy, expressing their opposition to awarding the project to the aforementioned consortium.

The government of President Daniel Noboa justified the direct awarding of the contract, arguing that the consortium complied with all constitutional requirements and the Hydrocarbons Law, which establishes the limits for oil exploration and exploitation.

Pablo Dávalos, an analyst and professor at the Pontifical Catholic University of Ecuador, told The Associated Press that the decision to rescind the agreement was primarily due to the pressure from social protests. He also noted that this move could impact Noboa’s popularity in the context of the upcoming presidential elections, in which he is running for re-election. In this sense, the failure to pay the advance was the key factor in announcing the termination of the contract.

The electoral campaign is still ongoing, with the second round scheduled for April 13. In the first round, held in February, both Daniel Noboa and Luisa González achieved very close results, leading to a technical tie. Therefore, it is believed that the contract’s cancellation is more related to domestic politics than to international geopolitics and relations with the People’s Republic of China.

The agreement contract was expected to be signed at the beginning of April. However, without it being initially stipulated, President and candidate Daniel Noboa demanded the $1.5 billion advance payment, which, as mentioned, was never made.

Before Noboa, at least three Ecuadorian governments attempted to grant a concession for this oil field to private companies—those of Rafael Correa, Lenín Moreno, and Guillermo Lasso. However, none of them succeeded.

Last but not least, it is worth noting that in 2024, Ecuador’s oil production fell below 477,000 barrels per day, a significant figure considering that the oil sector is one of the country’s main sources of fiscal revenue.

Main Source:

Ecuador da por terminado polémico acuerdo con empresa China sobre el más grande campo petrolífero – AP

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