President Daniel Noboa’s oil revitalization plan for Ecuador’s Sacha field is faltering ahead of elections, facing backlash over a deal with Sinopetrol. Criticism mounts concerning the consortium’s capability, and Noboa has issued a contentious ultimatum for a bonus payment, sparking speculation about his intentions as election approaches.
Ecuadorian President Daniel Noboa’s plan to revitalize the country’s largest oil field is facing significant challenges as the date for the runoff election approaches. Following a controversial agreement made last year with the Sinopetrol consortium, comprised of various foreign companies, Noboa has encountered considerable criticism that intensified with the recent resignation of his finance minister, Juan Carlos Vega. Presidential rival Luisa Gonzalez has pledged to revoke the deal should she win the upcoming election.
Reviving the Sacha field is crucial for Ecuador’s struggling economy, yet Noboa’s method of selecting an operator has drawn ire across the political spectrum. The investor group includes Amodaimi, associated with China’s Sinopec, and Petrolia from Canada, which have been questioned regarding their financial capability and expertise needed to enhance oil production. Amidst growing scrutiny, Noboa issued a threatening ultimatum to Sinopetrol to pay a $1.5 billion bonus significantly earlier than agreed, sparking speculation over his intentions.
Political risk analyst Sebastian Hurtado remarked, “The damage has already been done, but he’s limiting his losses.” Former Oil Minister Fernando Santos suggested that Noboa’s ultimatum is a “pretext to end the negotiations elegantly.” While Noboa’s office has not provided further commentary, he confirmed the deadline during a public event, stating, “We are going to keep our word.” Should the consortium meet the bonus payment, it would enable the next administration to boost revenues amidst ongoing economic instability.
Ecuador officials similarly aim to increase oil production to 1 million barrels daily, though financial challenges and disputes with international companies have hindered this goal. Notably, oil extraction from the Sacha field has decreased by 15% from its 2014 high of 560,000 barrels a day. Critics highlight that the selection of Sinopetrol lacked a competitive bidding process, further questioning the production sharing agreement that would allow the consortium to benefit from all production.
Concerns have also been raised regarding New Stratus, which was previously deemed unsuitable to operate within Ecuador. Petrolia has committed to sourcing third-party funding for the bonus, even suggesting equity sales, with the general manager stating they are “making all efforts to obtain the funds as requested.” However, responses from other parties have remained elusive amidst the unfolding situation.
In summary, President Daniel Noboa’s efforts to rejuvenate Ecuador’s main oil field through a contentious agreement with Sinopetrol are struggling as the nation approaches a crucial election. Criticisms from political rivals, concerns over the capabilities of the involved consortium, and a harsh ultimatum from Noboa have created uncertainty for the future of this plan. The outcome could significantly impact the economic landscape depending on who wins the presidency.
Original Source: financialpost.com
