The people of Ecuador are rising up to refound their country as a pluri-national homeland for all. This inspiring movement, with Ecuador's indigenous peoples at its heart, is part of the revolution spreading across the Americas, laying the groundwork for a new, fairer, world. Ecuador Rising aims to bring news and analysis of events unfolding in Ecuador to english speakers.

Wednesday, August 06, 2008

Ecuador takes over City Oriente wells

IHT, 1/8/2008

QUITO, Ecuador: City Oriente, an oil company controlled by U.S. investors, ended its drilling and exploration contract with Ecuador's government 13 years early on Friday, transferring operations to a subsidiary of state-owned oil company Petroecuador.

Ecuador's government paid US$69 million to end City Oriente's 24-year contract and assume control over its jungle oil wells within three months, Oil and Mining Minister Galo Chiriboga said in a news release.

The contract was set to expire in 2021, but Panama-based City Oriente reached an agreement to pull out after six months of talks, resolving an arbitration suit over disputed back taxes the government claimed it owed.

In 2006, Ecuador more than doubled taxes on windfall oil income — or earnings on oil sold above prices fixed in company contracts before prices skyrocketed — from 20 to 50 percent. President Rafael Correa last year signed a decree hiking the state's share of that income to 99 percent.

City Oriente sought to challenge those taxes before a World Bank arbitration court, but this week's settlement precludes that claim. Correa's government is currently renegotiating the contracts of four other foreign oil companies, including Paris-based Perenco and Brasil's Petrobras, to boost its share of their income.

"It's very gratifying ... to have reached a solution with good terms to this conflict with the state," City Oriente's chief executive Jose Paez said earlier this week.

City Oriente pumps some 3,000 barrels a day in Ecuador — less than 1 percent of the country's daily output of around 500,000 barrels.

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