OIL AND GAS LAW UPDATE: ECUADOR

• Jurisdiction: Derecho Internacional

International Mining and Oil & Gas Law, Development, and Investment
(Apr 2011)
CHAPTER 24F
OIL AND GAS LAW UPDATE: ECUADOR
Roque Bustamante
Juan Felipe Bustamante
Bustamante & Bustamante Law Firm
Quito, Ecuador

RECENT DEVELOPMENTS IN THE HYDROCARBONS INDUSTRY IN ECUADOR

HISTORY

• Ecuador has vast experience in hydrocarbons exploration and production, mainly oil, in the eastern part of the country at the Amazon Basin.

• Multinational companies have been in Ecuador for more than 40 years.

• Some investors have had success in the country, while for others Ecuador has been a nightmare.

TYPE OF CONTRACTS

• Throughout its hydrocarbons history, (past 40 years) Ecuador has implemented different types of contracts, from association, services, production sharing, specific services with tariff related to price and, the latest, service contract with a fixed tariff.

• The tendency has been that with low oil prices, the government prefers production sharing and, with high oil prices, it prefers services, recently with a fixed tariff.

DIFFERENT TIMES, DIFFERENT TYPES OF CONTRACTS

• Concessions in the 70's. Special income tax rate for oil producers. 87.5%

• In the 80's, Ecuador organized bidding processes and many areas were awarded to important investors, including OCCIDENTAL, CONOCO, ORYX, EXXON, ELF, PETROBRAS.

• The service contract allowed for the reimbursement of costs and investments, plus a profit paid in oil.

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THE PAST 20 YEARS

• The TEXACO contract ended in the early 90's and all the fields and production were reverted to the Government of Ecuador. As a result the...