Ecuador’s President Daniel Noboa faces backlash over his oil revival plan for the Sacha field as he approaches a critical election. Critics question the competency of the chosen consortium and procedures behind the deal, while Noboa threatens to cancel unless a $1.5 billion entry bonus is paid. Political analysts suggest these actions may be a desperate attempt to salvage his candidacy following a closely contested first election round.
Ecuador President Daniel Noboa’s initiative to rejuvenate the nation’s largest oil field is faltering as he navigates the final weeks leading up to a runoff election. Since securing a deal last year to transfer control of the Sacha oil field to a consortium named Sinopetrol, Noboa has encountered severe criticism regarding his management of this agreement. His Finance Minister, Juan Carlos Vega, resigned amidst growing discontent, and Noboa’s presidential adversary, socialist Luisa Gonzalez, has pledged to revoke the deal if she is elected.
The potential revival of the Sacha field is pivotal for Ecuador’s struggling economy and hinges on foreign investment. However, Noboa’s method of selecting an operator for the field has drawn bipartisan condemnation, raising concerns about Sinopetrol’s financial capacity and technical expertise to enhance production. The consortium comprises Amodaimi from China’s Sinopec and Petrolia, a unit of Canada’s New Stratus Energy Inc.
In the face of increasing scrutiny, Noboa recently indicated he might cancel the contract unless the consortium pays a $1.5 billion entry bonus by March 11, accelerating the payment deadline significantly. Analysts speculate that this maneuver may be a strategic move by Noboa to abandon the deal and preserve his political aspirations, having barely defeated Gonzalez in the first election round.
Sebastian Hurtado, from Prófitas, commented, “The damage has already been done, but he’s limiting his losses.” Additionally, former Oil Minister Fernando Santos remarked about Noboa’s ultimatum as a potential cover for ending negotiations amicably. While Noboa’s office did not provide immediate feedback, he confirmed the deadline and emphasized the importance of adherence to the deal.
The anticipated augmentation of Sacha’s production could financially benefit the winning candidate in the upcoming elections, while the immediate $1.5 billion bonus would aid Noboa’s administration in addressing fiscal concerns. Historical attempts to increase Ecuador’s production to one million barrels per day have been thwarted by economic instability and bureaucratic inefficiencies, leading to a significant 15% decline in the field’s output since 2014.
Critics argue that Noboa should have conducted a competitive bidding process instead of choosing the consortium, particularly disputing the terms of the production-sharing agreement, which favors Sinopetrol excessively. Concerns are also raised about New Stratus’s minimal production capability and its previous rejection as a viable operator for a smaller field.
While Petrolia is actively seeking third-party funding to fulfill its financial obligations, including potentially selling shares, its general manager expressed that Noboa’s ultimatum has created a critical situation. Responses from representatives of Sinopetrol and relevant Chinese officials regarding these developments remain elusive.
In summary, President Daniel Noboa’s oil revival strategy for the Sacha field is increasingly precarious as he approaches a crucial electoral decision. Amidst criticism and financial pressures, Noboa’s tactics may signify a shift in his political strategy, emphasizing the urgent need for effective governance in the oil sector. The outcome of this situation may greatly influence Ecuador’s economic future and the prospects of its incoming leader.
Original Source: financialpost.com
