Rumble in the Jungle: Correa Threatens to Take Over Oil Fields
Business Monitor International, May 2010, Pages: 7
As Correa ramps up the rhetoric against IOCs, BMI looks at the likelihood of expropriations and analyses the factors behind the hardening of the government's line.
Ecuador’s President Rafael Correa has promised to legalise the expropriation of foreign-owned oil assets if private operators fail to migrate to new service contracts offered by the government. The announcement is Correa’s most explicit warning to oil companies so far, demonstrating the government’s determination to raise its share of oil revenues in the light of falling budget receipts. While the properties of private producers are under real threat, full scale nationalisation does not yet constitute our core view.
During a scheduled televised address on April 17, Correa said he had ‘run out of patience’ with private oil companies. To speed up contract negotiations he promised to present to parliament a bill that would authorise the expropriation of privately-owned oil fields.
Since 2008, Correa has been seeking to substitute the current contract model based on production sharing with fixed-fee service arrangements, but progress has been patchy. The latest government deadline for the finalisation of the contracts expires in April 2010 and is likely to be missed. In this special report BMI looks at the likelihood of takeovers and analyses the factors behind the hardening of the government’s line.
Rumble In The Jungle
Introduction
How Likely Are New Expropriatio?
Chart: No Uptick In Sight
Why Is Correa Stepping Up the Rhetoric?
Table: ECUADOR BUSINESS ENVIRONMENT SWOT
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