President Daniel Noboa’s oil revival plan in Ecuador is faltering as he prepares for a runoff election. The deal with the Sinopetrol consortium faces backlash, leading to ministerial resignations and doubts about production capabilities. Noboa’s ultimatum for a $1.5 billion bonus payment by March 11 sets a tight deadline, complicating chances for economic recovery and raising electoral stakes.
Ecuador President Daniel Noboa is facing escalating challenges as he seeks to revitalize the country’s largest oil field, the Sacha field, right before a critical runoff election. His controversial deal with the Sinopetrol consortium, which includes foreign oil companies, has drawn significant criticism and led to the resignation of Finance Minister Juan Carlos Vega. Opponent Luisa Gonzalez has stated she would revoke this arrangement if elected in the upcoming April 13 vote.
The revival of the Sacha field is essential for Ecuador’s struggling economy, but Noboa’s approach has been criticized across party lines. Detractors are skeptical about the consortium’s financial capability and operational expertise to enhance production. Amid this criticism, Noboa has threatened to cancel the contract if a $1.5 billion entry bonus isn’t paid by March 11, expediting the timeline significantly for the consortium.
Analysts suggest that this move may be an attempt by Noboa to undermine the deal and improve his electoral prospects after narrowly defeating Gonzalez in the first election round. Political risk consultant Sebastian Hurtado noted that Noboa’s actions indicate an effort to mitigate losses. Former Oil Minister Fernando Santos viewed the ultimatum as a strategy to gracefully exit negotiations.
Noboa has confirmed the deadline publicly, asserting, “If the bonus isn’t paid tomorrow, then it won’t go ahead.” This bonus is crucial for the fiscal health of whichever candidate wins the election, though Ecuador has a long-standing goal to boost oil output to 1 million barrels daily, facing multiple hurdles.
Ecuador has experienced a 15% drop in production from Sacha since its peak in 2014, with Petroecuador accounting for 80% of total output. Critics of the Sinopetrol deal argue that Noboa should have facilitated an open bidding process instead of selecting the consortium directly, raising concerns about the production sharing agreement and the capability of New Stratus Energy, noted as a minor player in oil production.
Petrolia aims to secure funding to meet its $600 million obligation for the bonus and has even considered selling shares. The consortium has not publicly commented on Noboa’s deadline but is reportedly working hard to secure the funds amidst a pressing situation.
As Noboa navigates these political and economic challenges, the outcome may significantly shape Ecuador’s future oil production landscape and its overall economic stability.
Ecuador’s oil revival strategy under President Noboa is suffering significant setbacks as election pressures mount. The controversial deal with Sinopetrol faces scrutiny over its legitimacy and the consortium’s capabilities. Noboa’s ultimatum to accelerate the payment timeline creates further complications, raising questions about the future of Ecuador’s oil production and fiscal recovery. As electoral dynamics shift, the necessity for transparency and effective management in oil dealings remains paramount.
Original Source: financialpost.com
