[R-G] Ecuador to borrow oil from Venezuela as protests halt production
fentona at shaw.ca
Sat Aug 20 01:11:08 MDT 2005
Copyright 2005 The Financial Times Limited
Financial Times (London, England)
August 20, 2005 Saturday
USA Edition 2
SECTION: THE AMERICAS; Pg. 2
LENGTH: 524 words
HEADLINE: Ecuador to borrow oil as protests halt production
BYLINE: By HAL WEITZMAN
Ecuador has asked to borrow crude oil from Venezuela after days of
violent protests in its oil-rich Amazon region forced the suspension of
production by Petroecuador state oil company.
Magdalena Barreiro, economy minister, said yesterday Ecuador needed
Venezuela's help "in order to be able to continue exporting normally"
after attacks on installations by community groups cut oil production
by about 65 per cent. Venezuela said late yesterday it had not received
The price of oil exceeded Dollars 64 (Pounds 35.70, Euros 52.60) a
barrel yesterday as traders responded to the crisis. Ecuador is the
second biggest South American exporter of crude to the US. Oil exports
finance about 35 per cent of the country's budget.
The political fall-out from the crisis claimed Solon Espinoza,
Ecuador's defence minister, who stepped down yesterday at the request
of President Alfredo Palacio, as troops completed their occupation of
the eastern provinces of Orellana and Sucumbios, under a state of
emergency since Wednesday.
The armed forces said on Thursday evening they had secured the two
provinces, which produce three-quarters of state oil and about half of
Ecuador's private oil, in order "to guarantee the physical security of
the hydrocarbons complex and the return of the flow of petrol".
Earlier in the day, Petroecuador, Ecuador's biggest producer, suspended
all production after protesters occupied installations.
EnCana of Canada shut down its output in Orellana on Wednesday. Ivan
Rodriguez, energy minister, said protesters had sabotaged the company's
oil pipeline, causing 1,000 barrels of crude to seep into a river 230km
east of Quito.
The protests are the latest blow to Ecuador's troubled oil sector. No
new foreign investors have signed exploration or production contracts
California-based Occidental, the country's biggest private producer, is
mired in a legal dispute with the government, which has accused the
company of breaking its contract. EnCana, the second biggest private
producer, is desperate to leave Ecuador.
Production by Petroecuador has slipped steadily from 280,000 b/d in
1987 to 200,000 b/d this year, and it is estimated that its main
producing fields are declining by 5 per cent annually. It recently
appointed its third chief executive in nearly four months.
Rene Ortiz of the Ecuadorean Association of Oil Companies, which
represents private companies, told the FT the protests had cut private
oil production to about half its normal level of 340,000 b/d. "This is
costing private companies about Dollars 9m a day," he said, and total
losses for the sector amounted to Dollars 200m.
Local groups began protesting last Sunday, calling for higher wages,
more jobs for local people, and the construction of schools, roads and
The oil sector agreed last week to devote more funds to infrastructure
spending in oil-producing areas, but the deal failed to prevent the
unrest. Protest leaders are now demanding outright nationalisation.
Mr Rodriguez said that even once the protests were brought under
control, getting Petroecuador back to its usual production would take
at least 60 days.
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