Ecuador planned to start collecting a revised “extraordinary profits” oil tax May 1, Minister of Economy Diego Borja Cornejo told Dow Jones Newswires in Quito.
Ecuador’s Congress approved passage of a controversial tax on international oil companies operating in that country when oil prices rise above those stipulated in participation contracts.
The tax change calls for the government to receive at least 50% of the revenue when oil prices rise above a benchmark price.
Borja said the tax change could generate $500 million in revenues this year (OGJ, Apr. 17, 2006, Newsletter).
During a first-quarter earnings conference call Apr. 25, Occidental Petroleum Corp. executives said they believe Ecuador’s revised tax violates bilateral treaties with the US and possibly Ecuador’s constitution.
The higher tax could slash Oxy’s future cash flows from Educador production, executives said. Oxy produces 100,000 b/d of oil in Ecuador.
Borja told Dow Jones that he is talking with international oil companies about renegotiating their operating contracts.
On another matter, Oxy is offering Ecuador as much as $1 billion in disputed taxes, investments, and extra revenues to end a legal dispute (OGJ, Nov. 21, 2005, p. 34).
The dispute centers on whether the US firm in 2000 properly transferred part of its interest in a field to Canada’s EnCana Corp.
