DRAFT OF ECUADOR'S NEW HYDROCARBON LAW CIRCULATION, FACES DELAYS

A third draft of reforms to Ecuador's hydrocarbon law is circulating for comment and is expected to be submitted to that country's congress soon. The proposed reforms are part of the modernization and privatization program for the petroleum sector being promoted by the government. The reforms are to introduce several key changes to current oil legislation in the country and open opportunities to private capital in several sectors of the industry from exploration to transportation,

Oct. 18, 1993

2 min read

A third draft of reforms to Ecuador's hydrocarbon law is circulating for comment and is expected to be submitted to that country's congress soon.

The proposed reforms are part of the modernization and privatization program for the petroleum sector being promoted by the government. The reforms are to introduce several key changes to current oil legislation in the country and open opportunities to private capital in several sectors of the industry from exploration to transportation, refining, and domestic and international marketing.

The near monopoly role of state petroleum company Petroecuador would be diminished under the new law, with its affiliates transformed into operating companies governed by Ecuadorian business law and open to private participation.

Before the reforms can be carried out, however, congress must pass a modernization law needed as framework and support for the oil reforms. This bill has been debated for months in congress, with no approval date in sight. Even if the modernization law is approved, the oil reforms are sure to spark controversy in congress. So implementation of the modernization law may be delayed indefinitely.

Oil companies operating in Ecuador nevertheless have high hopes for the country's seventh bidding round, in planning for several years. It is expected to include a new production sharing contract model.

Twelve blocks in the Oriente jungle region and along the coast have been selected for the tender, tentatively scheduled for January 24 (OGJ, Oct. 4 Newsletter).

For now, prospects for the bidding round occurring soon are remote. In addition to the time needed to gather geological data on the tender blocks, the delays that likely lie ahead for implementation of the reforms translate into further delays for preparation of bid terms and model contracts based on those reforms.