Ecuador President Daniel Noboa’s Oil Revival Plan at Risk Amid Election Challenges

Ecuador President Daniel Noboa’s plan to revitalize the Sacha oil field is faltering ahead of the election. The deal with the Sinopetrol consortium faces criticism due to financing doubts, leading to Noboa’s ultimatum for a $1.5 billion entry bonus. Critics argue for an open bidding process and raise concerns about the consortium’s capabilities. The outcome of this situation could impact Noboa’s re-election bid and Ecuador’s economic landscape.

Ecuador President Daniel Noboa’s initiative to rejuvenate the nation’s principal oil field, Sacha, faces significant challenges as his re-election approaches. Despite striking a deal with the consortium Sinopetrol, Noboa has encountered increasing backlash regarding his management of the agreement, culminating in the resignation of his finance minister, Juan Carlos Vega.

The Sacha field’s revival is crucial for Ecuador’s struggling economy; however, critics from all political segments have openly questioned Sinopetrol’s financial capacity and operational expertise. The consortium comprises Amodaimi of China’s Sinopec and Petrolia, a subsidiary of Canada’s New Stratus Energy Inc., raising doubts regarding their ability to enhance oil production.

In response to ongoing controversy, Noboa has threatened to cancel the contract if Sinopetrol fails to pay a $1.5 billion entry bonus by an accelerated deadline of March 11. Analysts suggest this may be a strategic maneuver to salvage his candidacy in light of a narrow victory against socialist candidate Luisa Gonzalez in the initial election round.

Many commentators, including former Oil Minister Fernando Santos, perceive Noboa’s ultimatum as a tactic to escape the negotiations gracefully. Regulatory concerns have long hindered Ecuador’s aim to increase oil production to one million barrels daily, with significant production declines from a 2014 peak of 560,000 barrels.

Critics contend that Noboa should have opted for an open bidding process instead of selecting the consortium, particularly due to the advantageous production sharing agreement in favor of Sinopetrol. Furthermore, questions persist regarding New Stratus’ ability to capitalize on the Sacha field, given its limited production history.

While Petrolia has expressed intentions to raise necessary funds, including potential share sales, they conceded that Noboa’s ultimatum puts them in a precarious position. Despite outreach efforts, representatives from Amodaimi and the Chinese embassy’s trade attache in Quito were unavailable for comment.

In summary, President Daniel Noboa’s oil revival plan in Ecuador is at critical risk as election pressures mount. Facing considerable opposition, the future of the Sacha field depends on the actions of Sinopetrol and foreign investments required for production enhancement. The unfolding political dynamics and potential ramifications of the impending election could significantly influence the country’s oil sector and economic trajectory.

Original Source: financialpost.com