Ecuador’s Amazon Drilling Plan Raises Concerns Over Environment, Oil Dependency.
Environmentalists had lauded Correa’s 2007 offer to leave the Ishpingo, Tambococha and Tiputini (ITT) oil fields untapped, under what became known as the Yasuni-ITT initiative, in order to protect Yasuni National Park’s extraordinary biodiversity and uncontacted Taromenane Indians. The scheme would have avoided releasing 400 million tons of carbon into the atmosphere. However, though the strategy was in line with recommendations of the U.N. Intergovernmental Panel on Climate Change, major donors were skeptical. Correa blamed the international community for the initiative’s failure, noting that it had raised less than 1 percent of its $3.6 billion goal in six years. However, environmentalists observed that potential donors grew wary after Ecuador defaulted on its foreign debt in 2008 and when the state oil company Petroamazonas began working in block 31, another concession inside Yasuni National Park, just west of the ITT block.
Although Ecuador’s 2008 constitution prohibits oil drilling in protected areas, it allows for exceptions in cases of “national interest.” Petroamazonas has been working in block 31 for two years under a permit that predates the constitution, and is nearly ready to begin extraction there. Correa asked the congress, which is dominated by his Alianza PAIS party, to produce a resolution of national interest for exploiting the oil in blocks 31 and ITT, which holds 20 percent of Ecuador’s known oil reserves. After weeks of debate, the Congress approved that document on Thursday by a vote of 108 in favor and 25 against.
Environmentalists now see a national referendum on the issue as their only hope to stop drilling in Yasuni. After deliberating for a month, the country’s constitutional court approved a request for a referendum last week, and a coalition of groups called Yasunidos will soon begin collecting the signatures of 5 percent of the country’s registered voters—a prerequisite for the plebiscite.
The government has already moved to exploit other oil fields in comparably remote and wild areas of the Amazon Basin. Petroamazonas is negotiating with indigenous communities in three oil blocks to the south of Yasuni, and an additional 13 blocks are being offered to foreign companies through an auction known as the 11th Round.
Ecuador’s government gets about half of its revenue from oil, and Correa has spent more of that money on social programs than previous presidents, while overseeing a reduction of the percentage of Ecuadoreans living in poverty from 37 percent to 27 percent. This helped him win re-election last February with 57 percent of the national vote. During one of his weekly television and radio addresses last month, Correa said that 181 mayors had signed a document supporting his decision to exploit the ITT oil fields.
According to the Ecuadorean daily El Comercio, the country produces an average of 518,000 barrels of oil per day, and if work in the ITT block begins next year, state oil officials predict that production will rise to 600,000 barrels per day in 2017 to peak at 740,000 barrels per day in 2019, after which it will decline.
Despite rising oil production and high market prices, however, the Ecuadorean government has had trouble covering the cost of its varied social programs, infrastructure improvements and expanded bureaucracy. Following its 2008 default on international loans, Ecuador resumed borrowing, primarily from China. According to a Chinese government website, China has lent Ecuador $9.3 billion, some of which is an advance payment for future oil deliveries.
Alberto Acosta, who served as minister of energy and mines in Correa’s first administration but ran against him in the 2013 presidential election, claimed that debt played an important role in the decision to exploit the ITT oil fields. He also warned that, by increasing the government’s reliance on petroleum, Correa is contributing to a crisis in the future, when Ecuador’s oil reserves fall too low for the country to continue exporting.
“The oil will run out. Sooner or later, we will have to face that challenge,” observed Acosta in an email interview, adding that he expects it to happen in 10 to 15 years.
Acosta insisted that there are alternatives for raising the revenue that the government needs, such as renegotiating contracts with telecom companies and reducing fuel subsidies, which will cost the state $4.5 billion this year. According to a recent study by the Center for Economic and Social Rights, the government could raise more money by increasing the tax rate of the country’s 130 largest corporations by 1.5 percent than it will earn from exporting the ITT oil.
The congressional resolution that authorizes drilling in Yasuni contains a section stipulating that some of the revenue should be used to diversify the economy to decrease reliance on oil. However, Acosta likened the policy of increasing oil production to overcome the country’s dependence on oil to giving more drugs to an addict to help him kick his habit.
Whatever the fate of the ITT block, Correa is bound to face opposition to future expansion of oil drilling in the Amazon Basin, whether from the indigenous people who live there or urban voters who want to preserve their nation’s natural treasures. Whether or not the government manages to use increased oil revenues to diversify Ecuador’s economy before its reserves run low remains to be seen.
David Dudenhoefer is a freelance journalist based in Lima, Peru, from where he covers much of South America.