After burning through five energy ministers, President Rafael Correa was finally able to pass the petroleum reform that replaces a production-sharing model with a flat rate per barrel produced payment scheme. The oil of Ecuador now belongs to the Ecuadorian state.
As the IPS reported, January 23rd marked the last day for private companies to renegotiate small and large field contracts. Over the last five months, 7 of the 16 foreign oil companies made the decision to leave Ecuador. These included U.S.-Colombian Pegaso and U.S. Bellwether along with Spanish, Brazilian, Argentinian and other mixed-consortiums.
Ecuador’s oil sector accounts for nearly 50% of export earnings and one-third of tax revenues, so for the state to reclaim this kind of control over its most profitable resource does promise to bring benefits to the people of Ecuador.
Correa has been working towards an increase in the percentage of petroleum revenues spent on social programs since his term began in January 2007. Just what kind of programs impact this new revenue will have on the lives of Ecuadorian’s poorest citizens will become more apparent over the next ten years as the multinational companies continue to invest.
Ecuador expects to hold on to an extra 2.1 million dollars a day or 771 million dollars for 2011 and is now set to receive 100 percent of rising oil prices, which will prove crucial with the increasing
Article by Allison Leahy, appearing courtesy Earth & Industry.