Ecuador Seeks Crude in Amazon Rainforest as Economy Slows

Photographer: Dolores Ochoa/AP Photo

A demonstrator holds a sign that reads in "Ecuador doesn't love life" during a protest outside the government palace in Quito, Ecuador, Aug. 15, 2013. Close

A demonstrator holds a sign that reads in "Ecuador doesn't love life" during a protest... Read More

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Photographer: Dolores Ochoa/AP Photo

A demonstrator holds a sign that reads in "Ecuador doesn't love life" during a protest outside the government palace in Quito, Ecuador, Aug. 15, 2013.

OPEC-member Ecuador, where the rights of nature are recognized in the constitution, plans to develop crude deposits in an Amazon area declared a biosphere reserve by the United Nations as existing fields age and economic growth slows.

President Rafael Correa will ask the country’s congress to allow drilling in the Ishpingo-Tambococha-Tiputini oil fields in eastern Ecuador’s Yasuni National Park, he said yesterday in a speech broadcast on public television station ECTV. The area’s estimated oil reserves could be worth more than $18 billion, Correa said.

The decision reverses a policy to preserve nature in an area eight times bigger than Los Angeles, estimated by Correa to hold 920 million barrels of crude, or about 20 percent of Ecuador’s reserves. The proposal to develop the area comes as economic growth is forecast to slow for a third year.

“The needs of the government to increase revenue immediately,” prompted the proposal, Roger Tissot, director at oil consulting firm Tissot Associates, said in an interview from Vernon, British Columbia, yesterday.

The government, which has almost tripled public spending since Correa took power six years ago, needs the revenue to combat poverty and develop infrastructure, he said.

Oil Exports

Ecuador, which pumped an average 527,000 barrels of crude a day in July, according to a Bloomberg survey, is the smallest producing member in the Organization of Petroleum Exporting Countries, or OPEC.

Ecuador, which joined OPEC in 1973, later quit the cartel in 1992. Fifteen years later the country, which produces Oriente and Napo grade oils for export, rejoined OPEC.

Approximately two-thirds of Ecuador’s oil exports are destined for the U.S. while Peru and Chile are also large destinations for the country’s oil.

PetroEcuador Chief Executive Officer Marco Calvopina said June 26 in an interview in Houston that Ecuador’s oil production would reach 530,000 barrels a day by year-end. The company operates Ecuador’s three refineries and the SOTE crude pipeline. PetroEcuador is a state-owned oil company.

Development Blocked

Correa had presented a carbon-dioxide abatement plan to the UN in 2007, which called for blocking development of the fields known as ITT. The plan, which would prevent the emission of 407 million metric tons of carbon dioxide, sought $3.6 billion over 13 years in contributions from the international community to protect the area, according to the government.

Ecuador’s government collected a total of $13.3 million from international donors, Correa said.

“Let no one be fooled, the fundamental reason this failed is because the world is hypocritical,” Correa said in his speech. “The world has failed us.”

Correa, who broke with environmentalists and indigenous groups after reaching office in 2007, said the country’s state-owned oil producer Petroamazonas will operate the fields. The company runs the nearby Sacha oil field in a partnership with Venezuela’s state-controlled producer Petroleos de Venezuela SA. He didn’t provide details about how the development of the fields would be financed.

Ecuadorean indigenous groups, whose protests have helped overthrow at least two presidents since 2000, called for demonstrations against oil exploration in the Yasuni on Aug. 27, Pepe Acacho, a lawmaker from the indigenonus political party Pachakutik, said Aug. 14.

Indigenous Protests

“Even if Ecuador’s Plan B for the ITT fields moves forward, the government still face challenges related to how and with whom to develop the fields, potential social backlash from indigenous groups and whether to offer the fields through a bidding round or direct negotiations,” Tissot said.

Oil exploration in the area, home to at least two indigenous tribes living in isolation, will probably lead to increased deforestation, disruption of animals’ habitats and changes in local tribes’ cultures, Renato Valencia, a professor of rainforest botany and ecology at the Universidad Catolica in Quito, said today in a telephone interview.

Chevron Lawsuit

Pollution from oil operations in Ecuador’s Amazon rainforest has prompted a lawsuit against Chevron Corp. (CVX) The San Ramon, California-based oil producer was ordered by an Ecuadorean court in 2011 to pay as much as $19 billion in damages for the alleged dumping of toxic drilling waste in the country’s rainforest from 1964 to 1992 by Texaco, which Chevron acquired in 2000.

Chevron has denied wrongdoing and says the allegations are false, refusing to pay the damages and pledging to fight the ruling in international courts.

The Yasuni is the most biologically diverse place on Earth, according to the Ecuadorean government. The United Nations designated the area as a biosphere reserve in 1989 to help conserve its biological and cultural diversity.

“It may be that the impact isn’t as perceptible at first, but in the long run, one can tell,” said Valencia, who spent almost two decades working with the Smithsonian Tropical Research Institute investigating the park’s forests. “Nature always loses with these projects.”

To contact the reporters on this story: Pietro D. Pitts in Caracas at ppitts2@bloomberg.net; Nathan Gill in Quito at ngill4@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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