Latin America Advisor

Energy Advisor

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Will Ecuador’s New Contracts Attract More Oil Investors?

Ecuador’s energy minister, Carlos Pérez, introduced a new production-sharing contract model this year in an effort to boost investment in the country’s oil sector. // File Photo: Ecuadorean Government.

Ecuador launched an onshore licensing round in September, which Energy Minister Carlos Pérez expects will bring $1 billion in investments. Pérez has been traveling internationally in an effort to attract more bids, promoting the government’s latest adjustments to tax regulations and contracts as market-friendly. How do the recent changes in regulation benefit foreign investors? Will Pérez and the Ecuadorean government be successful in attracting more bidders? How important is the South American country’s oil and gas sector to boosting the economy?

Ramiro Crespo, president of Analytica Securities in Quito: “There was a lot of national and international interest in the technical meeting on the oil fields in which Ecuador is seeking to boost investment. The change of service contracts to production-sharing contracts is fundamental: companies will be paid in barrels, not money. Risk is thus reduced to the industry’s standard risk, without the country risk factor, especially in a country that is a notorious defaulter. This will attract better companies and investment. The last invitation to invest in minor oil fields was not so successful because it was for service contracts, adopted in former President Correa’s government, which delayed payment for up to two years. Payment in barrels allows companies to sell them directly on the market; and Ecuadoreans will pay close attention to make sure Petroecuador’s selling price is not constantly lower than private companies’ prices. This will reduce corruption in exports, one of the reasons why Correa adopted the service contract model. If Minister Pérez is able to merge Petroecuador and Petroproducción and capitalize on the new company by listing it in global stock markets, he could…”

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A sister publication of the Inter-American Dialogue’s daily Latin America Advisor, the weekly Energy Advisor captures fresh analysis from business leaders and government officials on the most important developments in oil and gas, biofuels, the power sector, renewable energies, new technologies, and the policy debates shaping the future of energy in the Western Hemisphere. To subscribe or for more information, contact Erik Brand, publisher of the Advisor, at ebrand@thedialogue.org.


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Erik Brand

Publisher
P. 612.242.1863
E. ebrand@thedialogue.org

Gene Kuleta

Editor
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E. gkuleta@thedialogue.org