Ecuador's President Rafael Correa has threatened to expel foreign oil companies, if they fail to reverse dwindling output in the OPEC nation, and also to nationalize an Amazon oil field if Brazil's state oil company, Petrobras, fails to hand it over – and soon.
Correa, who was speaking on the back of winning a referendum to increase his sway in the country's oil and mining sector, fired out the warning over the weekend.
“Don't play with fire,” said the former Economy Minister, during the weekly televised address to the nation. “Invest and recover production or you will leave the country,” he threatened.
History suggests that Correa is a man of his word. The latest warning will add to already growing tensions with Brazil over the expulsion last month of Odebrecht, a Brazilian construction company that built a hydroelectric dam in the country, and the seizure of its assets by the Ecuadorian army.
The Brazilians were alarmed by Correa's decision to use an excessive display of force by sending government troops to occupy Odebrecht's plant while negotiations were still in progress.
President Correa is angry with decreased production levels in oil fields operated by foreign oil firms including the likes of as Repsol-YPF of Spain, Andes Petroleum of China, and Petrobras – as I previously mentioned.
He added that output of foreign oil companies has declined since negotiations for new contracts began last year.
Petrobras, in particular, has angered the Ecuadorian government over delays transferring an oil block to the state.
However, both sides have already agreed, as of two weeks ago, to hand over the block inside a protected Amazon jungle park.
The Ecuadorian premier says that foreign oil companies have delayed signing similar agreements, because they were all waiting for him to lose a constitutional referendum, on September 28. The companies under threat are paying the price of miscalculated political forecasting.
“Now, more than ever, we have the democratic legitimacy to demand that these companies comply with the country,” said the man with the new mandate.
64% of Ecuadorians voters backed Correa over the new constitution.
Several producers, including Petrobras and Repsol, agreed in August to start negotiating a switch to the payment model favored by the Ecuadorian government – within 12 months.
This meant the companies agreeing to pay the government directly for producing the oil, rather than the current terms under which they share with them a portion of their revenues – up to a set price.
This was a significant move when considering that foreign oil companies account for close to half of Ecuador's production of 500,000 barrels of crude oil per day.
Also, oil exports are Ecuador's main source of revenue and key to Correa's plan to boost public investment to aid the poorer levels of Ecuador's society.
