MercoPress. South Atlantic News Agency

Ecuador’s new hydrocarbons bill ready for Congress, announces Correa

President Rafael Correa wants oil corporations to change from production to services contracts

Ecuador President Rafael Correa said over the weekend that a new hydrocarbons bill is ready and will be sent to the National Assembly. The bill will allow the government to speed the shift from production contracts to service contracts for oil companies operating in Ecuador.

“The reform for the hydrocarbons law is ready. It will be sent to the National Assembly,” Correa said during his weekly media address. “The reform means that if by December oil contracts are not renegotiated, well here is the money, have a good trip back home because we are not going to keep waiting”.

Correa's administration wants to end the current production-sharing deals and replace them with service contracts that would see oil companies getting a production fee that includes a reimbursement for investment costs, while the government would own 100% of oil and gas produced.

According to Correa, the government needs the legal changes to have the necessary instruments for the expropriation of private oil operations if companies refuse to sign new service-based contracts.

“We need the legal instruments in case they don’t want to change to service contracts. We won’t be keeping a single dime, here’s the value of your investment but we are not interested in working with you any longer. Here in Ecuador the government and the people of Ecuador command, not the large transnational corporations”, emphasized Correa.

Last week in Lima, Correa underlined he hopes to finish negotiating new contracts with oil companies by the end of the year. “We’ll not be at the whim of the corporations and their timetables”, he pointed out.

In Ecuador there are 34 contracts with various companies. The shift will also include the so-called marginal fields, or low-production fields, and all types of contracts.

Government officials have said that the negotiations will give priority to eight contracts held by five companies: Italy's Eni SpA, Spain's Repsol YPF SA, Brazil's state-run Petrobras, China's Andes Petroleum Co., and Petro-Oriental de China. The negotiations will take place separately with each company.

Oil is Ecuador’s main export and helps finance 25% of the national budget.