Money for nothing: What's wrong with this proposition?

Jan. 17, 2011
Here's the deal: For $3.6 billion, Ecuador won't develop 846 million bbl of oil. Any takers?

by Bob Tippee, Editor

Here's the deal: For $3.6 billion, Ecuador won't develop 846 million bbl of oil. Any takers?

This is an offer to the world, a gesture of grand sacrifice made in the spirit of environmental righteousness.

Or might it be a ploy to make money without having to do any work? Ecuador has set a precedent for wanting money for nothing.

President Rafael Correa has offered to refrain from developing oil reserves lying under Ecuador's rainforests in exchange for half what he estimates the oil to be worth.

The supposition is that people in other countries will see transcendent value in not disturbing the jungle and burning the oil.

And they'll send him $3.6 billion for this generous forbearance.

He'll find antioil activists willing to pound that much sand down that deep a rathole. But they'll want it to be other people's sand.

Most observers will see the lunacy of paying someone not to work. Even if he wanted rainforest reserves to be developed, Correa would have trouble getting the work done.

With its record of expropriations and sign-or-leave contract restructurings favoring Petroecuador, the national oil company, his country has positioned itself low in any ranking of places in which international oil companies might want to risk money.

The allure glitters even less under the shimmering light of a farcical effort in Ecuadorian courts to pry $113 billion from Chevron for environmental damage the company didn't cause.

In fact, Ecuador has turned itself into such a risky investment destination that Correa's loony offer might attract more money than future oil licenses.

The Financial Times reports Spain has ponied up $1.3 million to prevent work in the rainforest, Chile $100,000, and Belgium's Walloon government $390,000. Small sums, these, but proof of the witlessness that overcomes governments offered the chance to waste public money.

There's no word yet about a contribution from Correa's buddy Hugo Chavez, the socialist president of Venezuela. Chavez has been busy disemboweling his own country's oil industry.

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