Ecuadorian President Daniel Noboa’s plan to revitalize the Sacha oil field is faltering as he approaches a crucial re-election runoff. He faces criticism regarding the deal with Sinopetrol and has pressured the consortium for an accelerated payment. Political analysts suggest this move might be an attempt to salvage his candidacy as doubts grow over the consortium’s capability, while concerns about the nation’s overall oil production continue to mount.
Ecuador’s President Daniel Noboa faces significant challenges with his initiative to revitalize the Sacha oil field as he prepares for re-election ahead of a critical runoff vote. Following last year’s agreement transferring the management of the Sacha field to Sinopetrol, a conglomerate of foreign oil enterprises, Noboa has been criticized for his execution of the deal. This criticism intensified after the resignation of his finance minister, Juan Carlos Vega, related to the agreement and increased scrutiny from his opponent, socialist candidate Luisa Gonzalez, who has pledged to revoke the contract if she wins on April 13.
The Sacha oil field’s revival, essential for Ecuador’s struggling economy, relies on foreign investment. However, Noboa’s strategy for operator selection has drawn bipartisan disapproval, with doubts about the consortium’s capability to enhance production. Criticism centers around whether the consortium, which includes Amodaimi (a subsidiary of Sinopec) and Petrolia (a unit of New Stratus Energy), possesses the necessary financial resources and expertise.
In light of ongoing controversy, Noboa issued a demand for a $1.5 billion entry bonus from Sinopetrol by March 11, setting a challenging timeline for the consortium. Analysts view this as potentially indicative of Noboa’s intentions to dissolve the contract to safeguard his re-election prospects after narrowly defeating Gonzalez by a mere 15,000 votes in the first electoral round. Sebastian Hurtado, a political risk consultant, noted that, “The damage has already been done, but he’s limiting his losses,” while former Oil Minister Fernando Santos described the ultimatum as “a pretext to end the negotiations elegantly.”
Despite the turmoil, Noboa publicly maintained the deadline on a recent visit to Guayaquil, stating, “We are going to keep our word,” emphasizing that failure to meet the bonus requirement would result in the deal’s cancellation. Increasing output from Sacha is crucial for revenue generation for whichever candidate succeeds, with the immediate $1.5 billion payout being vital for Noboa, regardless of long-term outcomes.
Ecuador has long sought to escalate oil production to 1 million barrels per day. However, this aim has been impeded by financial crises, bureaucratic inefficiencies, and disagreements with foreign oil firms. Notably, production from the Sacha field has declined by 15% from its peak of 560,000 barrels per day in 2014, with Petroecuador currently accounting for 80% of national output while a select few foreign companies contribute the remainder.
In conclusion, President Daniel Noboa’s oil revival plan for Ecuador faces significant obstacles amidst a turbulent political landscape as he seeks re-election. The challenges surrounding the Sacha field’s revival, public skepticism regarding foreign investments, and demands on Sinopetrol amplify uncertainties. The outcome of the upcoming election on April 13 will play a crucial role in determining the future of the oil sector in Ecuador, with substantial implications for the country’s economy.
Original Source: worldoil.com
