BusinessWeek, July 27 2010
Oil companies operating in Ecuador will no longer hold a stake in the oil they produce but instead receive a set production fee under new rules put in place Tuesday by the government of leftist President Rafael Correa.
The new payment plan will likely restrict private windfalls when world oil prices quickly rise, said Alexis Mera, legal secretary to the president's office.
"With the new law we pay them a rate for oil produced," Mera told television broadcaster Uno. "With these reforms they won't take away a single drop of oil."
The government said companies have 120 days to renegotiate new service contracts or see their oil fields taken over by state energy company Petroecuador.
"There are companies that might not accept this," Natural and Renewable Resources Minister Wilson Pastor said. "If that happens we will pay a fair price for the liquidation."
Those affected include Spain's Repsol-YPF, Brazil's Petrobras, the Chinese consortium Andes Petroleum and Agip Oil, a subsidiary of Italy's ENI.
Opponents of the law say it will scare away investment from Ecuador's energy industry, the country's main money-earner.
Ecuador is an OPEC member that depends on oil for a third of the government's budget.
The law was published Tuesday without congressional approval. Ecuadorean law allows the president to enact bills the government deems urgent if lawmakers fail to approve, modify or reject them within set time limits.
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