Ecuador’s President Daniel Noboa’s effort to revive the Sacha oil field is struggling due to criticism over the deal with Sinopetrol. As he seeks re-election, the finance minister has resigned, and his opponent plans to revoke the deal if elected. Noboa’s demand for an early $1.5 billion payment may jeopardize the contract, raising questions about foreign investment in Ecuador’s oil sector.
President Daniel Noboa’s initiative to revitalize Ecuador’s largest oil field is failing as he seeks re-election ahead of the upcoming runoff. Following a deal to transfer the Sacha field to Sinopetrol, a consortium of foreign oil companies, Noboa has faced severe backlash regarding his management of the agreement, leading to the resignation of his finance minister, Juan Carlos Vega. His presidential rival, socialist candidate Luisa Gonzalez, has pledged to annul the deal if victorious in the election scheduled for April 13.
The Sacha field’s recovery is essential for Ecuador’s struggling economy and is heavily reliant on foreign investments. Critics, spanning various political ideologies, have raised concerns about Noboa’s strategy in selecting an operator for the field. They question whether the Sinopetrol consortium, which includes Amodaimi of China’s Sinopec and Petrolia of Canada’s New Stratus Energy Inc., possesses the financial resources and expertise necessary to enhance production levels effectively.
In light of the ongoing controversy, Noboa has threatened to terminate the contract unless Sinopetrol delivers a $1.5 billion entry bonus by March 11, a deadline that is much earlier than previously negotiated. Analysts suggest that this abrupt change may be a strategic maneuver by Noboa to undermine the deal and bolster his re-election prospects after narrowly leading Gonzalez by a mere 15,000 votes in the initial round.
Sebastian Hurtado, head of the political risk consultancy Prófitas, noted, “The damage has already been done, but he’s limiting his losses.” Former Oil Minister Fernando Santos described Noboa’s demand as a “pretext to end the negotiations elegantly.” Despite not responding to requests for comments, Noboa confirmed the deadline during a public event, stating, “If the bonus isn’t paid tomorrow, then it won’t go ahead.”
Increasing Sacha’s output would generate essential revenue for the upcoming administration. The anticipated $1.5 billion bonus was intended to provide Noboa with a critical immediate financial boost, irrespective of the deal’s long-term implications. Ecuadorian officials have historically aimed to escalate oil production to 1 million barrels per day. However, financial challenges, bureaucratic inefficiencies, and disputes with foreign companies have obstructed this progress. Currently, production from the Sacha field has seen a 15% decline from its peak of 560,000 barrels per day in 2014, with Petroecuador responsible for 80% of the nation’s oil output, and various foreign firms managing the remainder.
In summary, President Daniel Noboa’s oil revival initiative for the Sacha field is facing significant obstacles amidst his re-election campaign. The pressures from critics, alongside his financial ultimatum to Sinopetrol and the political ramifications from rival Luisa Gonzalez, underscore a complex scenario for Ecuador’s oil future. Ultimately, the success of this endeavor, along with its implications for the nation’s economic stability, remains uncertain as the election approaches.
Original Source: worldoil.com
