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Tuesday, January 15, 2008

PetroEcuador Finds Evidence of Widespread Corporate Corruption

By Stephan Kueffner

Jan. 7 (Bloomberg) -- The new management at Ecuadorean state energy company PetroEcuador found evidence of widespread corruption at the company.

``There is theft in the tens of thousands, tens of millions, hundreds of millions of dollars,'' Admiral Fernando Zurita, president of PetroEcuador, told reporters in Quito today. ``We will find much more as a result of the review that we are making of oil contracts.''

Ecuador President Rafael Correa on Nov. 29 declared a state of emergency for the company, saying it was so badly run, he was forced to bring in navy officers to run the company.

``Previously there were not enough people to fight this,'' Zurita said. Some executives bought equipment for tens of millions of dollars only to let it rot in storehouses at subsidiaries, he said. ``I will discover who ordered those things and send them to his desk or home and demand my money back,'' Zurita said.

He also plans to set up a corporate area for the protection of the environment that will cost the company $55 million. The lack of in-house cleanup capacity has cost PetroEcuador $350 million over the past three years as private-sector companies have billed it to handle oil spills, Zurita said.

The company has a budget of $4.24 billion for 2008, up 72 percent from $2.47 billion last year, he said. Investment will almost triple to $2.06 billion from $724.57 million last year. Ecuador expects to spend $3.61 billion in importing fuels, up 20 percent from $3.01 billion last year.

Lacking Refining Capacity

The Andean country lacks refining capacity to meet domestic demand for gasoline and diesel despite being a member of the Organization of Petroleum Exporting Countries.

PetroEcuador's total output will reach 309,000 by the end of this year, Zurita also said, up from an estimate of 297,000 as recently as Dec. 20.

Ecuador, the smallest OPEC oil producer, has a daily output of about 500,000 barrels. Energy Minister Galo Chiriboga also said today that Ecuador will ask OPEC for a quota above 520,000 barrels a day in the near term as the country expects production capacity to reach that level this year. He added that he expected OPEC to agree.

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