Ecuador says most oil firms to sign new deals

[Judi Lynn]

Ecuador says most oil firms to sign new deals
Today at 09:54 | Reuters

QUITO, Nov 20 (Reuters) - Ecuador is on the brink ofsigning new contracts with most private oil companies operating
in the country as the state tries to increase revenue from thesector, but a top official warned there may be some hold-outs.

Tuesday is the deadline for executives to ink new dealsthat would throw out profit-sharing arrangements in favor of
flat-fee service contracts. Several companies, such as Brazil'sPetrobras and two companies controlled by China's top oil andgas company CNPC, have balked at the terms.

"Of the seven companies with which we are negotiating, mosthave agreed to the contract ... We are polishing the
documents," Wilson Pastor, Ecuador's minister for oil policy,told Reuters late on Friday after a marathon negotiating
session.

He said that Tuesday's deadline remained firm."Those who do not sign on Tuesday will not sign at all,
definitely," he said.

More:
http://www.kyivpost.com/news/world/detail/90603/

[social_critic]

1. Some won't sign the new agreements

I suspect some of these companies will go to arbitration rather than sign. And new investment will likely be cut back, because there will be lack of confidence in the government until it pays the arbitration awards. Correa is known for his "artful shenanigans" which have a tendency to backfire on him.

[Peace Patriot]

2. Excellent! Ecuador is being tough. That is exactly what the people elected Correa to do!

And he's certainly in accord with his closest allies, Chavez of Venezuela and Morales of Bolivia, both of whom have won renegotiation of natural resource contracts--Venezuela, oil, Bolivia, gas--with multinational corporations, that greatly benefit their people, with profits devoted to social programs. Chavez improved over the rightwing giveaway of the oil--a 10/90 split of the profits, favoring the multinationals--by negotiating a 50/50 split, favoring Venezuela, with majority government control of the projects. Exxon Mobil walked out in a snit (they want ALL the profits--and no books, schools, food, pensions and other benefits to the poor and to Venezuelan society), but Chavez held firm and eventually numerous other countries and companies began flocking to Venezuela to take advantage of the Orinoco Belt (the biggest oil reserve on earth, according to the USGS), on Venezuela's terms. Morales has done the same with Bolivia's gas contracts, doubling Bolivia's revenues from one billion to TWO billion a year, and will be doing the same with Bolivia's lithium. In fact, Morales just got R&D funds from Japan with no promises to Japanese companies. They are doing it on the bet that it will position their companies well, when Morales begins handing out the contracts for exploiting this valuable resource.

On Bolivia's terms.. On Venezuela's terms.. On Ecuador's terms.. That is fruit of awesome grass roots struggle to elect these governments, honest, transparent elections and courageous leadership.

Rightwingers, of course, in typical shilling for the multinationals, will snipe at Correa--as one of our resident RW's does above--and predict failure and loss of investment and blah, blah, blah. The Bolivarian countries just keep doing what they're doing--tough negotiating, on behalf of their people, asserting their country's sovereignty, as they were elected to do--and succeeding at it. In fact, Chavez influenced Lula da Silva of Brazil to negotiate contracts for Brazil's new oil find on similar terms--Brazil keeps majority control and a substantial percentage of the projects are earmarked for Brazil's social programs.

Our corpo-fascist press, and their echoers here, DON'T WANT PEOPLE TO KNOW what's really happening in Latin America--that governments can stand up to multinational corporations. They're afraid we might get ideas. We've been fool enough to let them get away with it. How many times has one of these arrogant multinational bastards threatened a community in the U.S. 'Bend over. Give us tax breaks. Give us no unions. Give us no regulation. Or we'll go elsewhere." They get everything they want and more, and then they go elsewhere ANYWAY. Time to stop the blackmail. Latin American's leftist governments are showing the way.

[CJvR]

3. Split of what?

I don't think a shift of the profit shares would be intollerable to most companies - as long as it is a share of the profit it is still profit. However political control of the company means it will make political decissions rather than economical ones. What is to stop the new political management from loading the company up with tons of non-profitable activities to buy themselves votes and political power? This has happened although not yet perhaps to the extent feared, better to salvage what can be salvaged before RMS Chavez strikes the iceberg.

[dipsydoodle]

4. Subject is Equador

so what's the point in mentioning Chavez ?

[social_critic]

6. The previous post mentions Chavez and Morales

Both posters took the thread sideways when one of them mentioned Chavez, and the other responded.

Based on what I know about the oil industry in Ecuador, the move will likely backfire. And there are indeed better methods to increase tax take - other than creating JVs, which tend to become centers of patronage and bureacratic bungling. This is what has been observed in Venezuela, where the JVs are producing less oil now than they did under the previous contracts. Regarding Bolivia, the change there wasn't nearly what was touted, but it's doubtful Bolivia will now get to monetize its gas reserves as much as it wanted.

Brazil, its main client, balked at the Bolivian proposals, and decided to work harder to develop their own gas sources. This they have done with great success, and any gas they bring in from Bolivia in the future will be purchased only to keep Bolivia under Brazil's thumb.

These things tend to ebb and flow, and it takes time for actions to lead to reactions, but it's evident nations such as Ecuador and Venezuela are not going to grow their economies as much as they could if they had wiser leadership. Ecuador is already starting to suffer the impact of Correa's rapaciousness towards business and bond holders, and this means the country is going to receive much less foreign investment in the future. We'll see what happens later this week, but the odds are Petrobras won't agree to the deal on the table. And I read the Chinese don't like it either. If those two walk, then it's a clear signal to the industry the Ecuador deals aren't that good.

[Judi Lynn]

5. What sense does your post make? Take time to be coherent. n/t

[social_critic]

7. He's coherent but laconic

He means the split of the gross take can be changed without changing the legal structure of the entity running the oil operations. Correa seems to have been biased by Chavez into believing a Joint Venture structure with government majority of the shares is what's needed. However, the same can be achieved by passing laws to change taxes, and using a ministry or a directorate to control operations. For example, Norway has a very strict operational control of the oil industry via a directorate, and their taxes are as high as can be - Norway calibrates taxes to make the industry keep on working, and doesn't allow windfall profits.

There's a tendency for people who are not familiar with business or the way business can be controlled by government, to follow the flavor of the day policy. This is particularly true in Latin America, where some countries have been following the Chavista line. But the Chavista line is not working - the bottom line is they can't produce as much oil now as they did before, and their so called projects are stalled. Other than signing agreements and putting out press releases, they don't seem to be moving forward very much.