MercoPress. South Atlantic News Agency

Ecuador pushing for “fairer” share of oil windfall

Ecuador is demanding foreign oil corporations extracting crude in the country's Amazon region to hand over half of the windfall enjoyed as a result of high global oil prices.

Economy Minister Diego Borja speaking to foreign correspondents Thursday revealed his office is drafting legislation for submission to Congress reforming the hydrocarbons bill thus compelling corporations to share oil booming revenue.

Borja said that international crude prices are currently as much as four times higher than they were 10 or 15 years ago, when Quito was negotiating with foreign companies on concessions to drill for oil in the Amazon jungle.

"There is a global movement to modify conditions of petroleum contracts" given the sharp increase in prices added Borja, recalling that other countries have also adjusted their tax and royalty regimes to account for the surge.

Borja stressed his proposal rests on the idea that "profit margins, which were not expected in the earlier context, should be shared in a fair and equitable manner by the two parties to the business: the state which is the owner of the natural resource, and the corporation taking the risk by investing".

He insisted foreign corporations should not "carry off" with all the extra profits from surging oil prices but must rather share it the Ecuadorian government that badly needs the money.

But Mr. Borja made it clear that he is not advocating changes to the original contracts. "This is not a contract-renegotiation measure" he said, "it's a measure of legal re-codifying and, in that sense, is a unilateral move by the state" that will be implemented once Congress approves the change.

Borja said the initiative could generate an extra 400 million US dollars a year for the Ecuador government, and even more if it is applied retroactively to 2000, when the country adopted the U.S. dollar as national currency. He also pointed out that contracts with oil companies were the only ones not to undergo a formal review since the change to the US dollar.

Oil exports represent Ecuador's main source of revenue and fund over a third of the government budget. Production is 500.000 barrels per day, fifth-main oil producer in the Americas.

Government owned Petroecuador accounts for 40% of Ecuador's output, with the rest coming from a dozen foreign corporations.