Ecuador President Daniel Noboa’s oil revival plan for the Sacha field is in jeopardy ahead of elections, facing criticism and challenges over a deal with Sinopetrol. The approaching deadline for a $1.5 billion bonus raises concerns about feasibility, prompting speculation that Noboa may be attempting to extricate himself from the arrangement to bolster his candidacy.
Ecuador’s President Daniel Noboa is encountering significant challenges in his efforts to revitalize the Sacha oil field as he prepares for re-election ahead of the runoff on April 13. Critics have increasingly scrutinized Noboa’s agreement with Sinopetrol, a consortium of foreign oil companies, leading to the resignation of his finance minister, Juan Carlos Vega. Rival candidate Luisa Gonzalez has vowed to annul the agreement if elected.
The Sacha oil field’s revival is crucial for Ecuador’s struggling economy, but skepticism surrounds the financing capabilities of Sinopetrol, which includes subsidiaries of China’s Sinopec and Canada’s New Stratus Energy. Noboa has issued an ultimatum threatening to cancel the contract unless the consortium pays a $1.5 billion entry bonus by March 11, a deadline deemed impractical by analysts and viewed by some as an attempt to salvage his political position.
Sebastian Hurtado of Prófitas noted, “The damage has already been done, but he’s limiting his losses,” while former Oil Minister Fernando Santos suggested Noboa’s ultimatum was a maneuver to disengage from the negotiations. Despite the controversy, Noboa publicly committed to the deal during an event in Guayaquil.
Increasing output from Sacha could benefit the next administration, providing necessary revenue amidst Ecuador’s economic turbulence. However, falling production from Sacha has underlined the inefficiencies within the sector, leading to significant output loss since 2014, while public criticism intensified over the unilateral selection of Sinopetrol without an open bidding process.
Detractors argue that Noboa should have considered other bidders to ensure a fair selection process, especially given that New Stratus has struggled to establish a viable track record in Ecuador’s oil landscape. Following previous rejections of foreign interests in Ecuador’s oil fields, concerns remain regarding Sinopetrol’s capacity to increase Sacha’s output and deliver on promises made to the Ecuadorian government and its citizens.
In summary, President Daniel Noboa’s initiative to revive the Sacha oil field faces potential collapse as the election approaches, amid rampant criticism and diminishing confidence in the foreign consortium involved. The emphasis on maintaining contracts and raising oil production highlights the critical role of energy revenues for Ecuador’s economy. However, ongoing disputes regarding the competency of the selected operators and the failure to follow proper bidding processes have stifled progress, further complicating an already delicate political landscape.
Original Source: financialpost.com
