MercoPress. South Atlantic News Agency

Ecuador imposes additional windfall profit tax on oil

Ecuador expects to significantly increase oil revenue following the enforcement of a bill giving the government a 50% share in windfall profits from multinational oil companies.

"Ecuador daily revenue will increase by an estimated two million US dollars", said Congress speaker Wilfredo Lucero. Actually Congress passed a bill claiming 60% of additional revenues from booming international oil prices but Ecuadorian president Alfredo Palacio scaled the windfall percentage to 50%.

Under existing contracts that percentage was 20%, and international oil corporations have threatened to take Quito to court over the pretended retroactive charge.

But despite the legal objections of oil corporations, the reform was published Tuesday in the Official Gazette, according to a statement issued by the Ecuadorian congress. National legislators said that in enacting the reform they have applied "justice and fairness" to the petroleum contracting process "so that these elements are enshrined in the principles of economic equilibrium and legal security for the parties".

However Mr. Lucero said he was hoping the additional resources were to be invested in "re-launching the country's economy and addressing unsatisfied social demands in such areas as health, education and housing".

Fifteen foreign oil companies operate in Ecuador, the largest of which are Spain's Repsol-YPF; Italy's Agip; the Andes Petroleum consortium, headed by China's CNPC; U.S.-based Occidental Petroleum; and France's Perenco. Multinational corporations account 64% of Ecuador's daily output of roughly 550,000 barrels.

Ecuador's oil exports which last year totaled 5.4 billion US dollars are by far the country's main source of hard currency and oil revenue finance almost 40% of the central government's budget.