Ecuador's recent political turmoil has oil companies wondering about their future investments there.
President Abdala Bucaram took office last August with an agenda to end state subsidies for petroleum product prices, limit the power of unions, and boost foreign investment in the energy sector (OGJ, Nov. 4, 1996, p. 27).
But the unpredictable Bucaram alienated the country with his economic austerity measures, and the Ecuadorian Congress ousted him earlier this month and canceled his controversial domestic initiatives.
Congress replaced Bucaram with Fabian Alarcon, who will preside as interim president until August 1998. Alarcon is a smooth politician known for his ability to negotiate and skill at taking middle-of-the-road positions on tough issues.
Those aren't bad job qualifications for the presidency of a nation where 17 political parties are represented in an 82-member Congress.
As a centrist, Alarcon has not opposed privatization of Ecuador's industries or government subsidies for commodities.
Pipeline canceled
However, his appointment of Raul Baca as energy minister has foreign oil operators concerned. Baca is a liberal who, as a staunch supporter of labor unions, has criticized Ecuador's privatization efforts.
Baca immediately suspended a controversial international tender for the construction and operation of a 246,000 b/d pipeline from Sacha oil field in Oriente oil province to the Balao export terminal on the Pacific coast (OGJ, Feb. 17, 1997, p. 32).
He explained that the bidding process "lacked transparency." Baca also has declared that instead of building a new line, the existing trans-Andean pipeline be expanded by 50,000 b/d.
Some of the foreign operators of Ecuador's oil fields have been pressing for a new pipeline. They say exploration and production investments can't be justified if the existing line is running at capacity.
Under Baca, unions will see some restoration of their influence over oil policy decisions, and privatizations and subsidy elimination measures will be shelved for the time being.
The future
Despite its rollback of Bucaram's measures, the Alarcon administration is expected to be smoother than the previous regime, which fought a dispute with Maxus Energy Corp. with newspaper headlines and launched reviews of service contracts held by several oil companies.
But how the new administration handles another long controversy, Texaco's environmental cleanups at existing fields, could be the best indication of its attitude regarding foreign oil investments.
Officials of prior administrations could not decide whether to support the existing cleanup pact or demand a new one.
After a judge dismissed a suit last November that Ecuadorian Indians had filed in U.S. federal court against Texaco, Bucaram's government reversed Ecuador's position and decided to intervene on behalf of the Indian plaintiffs.
It will be hard for Alarcon to find the middle ground on that issue.
Copyright 1997 Oil & Gas Journal. All Rights Reserved.
