OIL AND GAS REFORM: NEW TRENDS IN ECUADOR

• Jurisdiction: Derecho Internacional

International Mining and Oil & Gas Law, Development and Investment
(Apr 2009)
CHAPTER 17C
OIL AND GAS REFORM: NEW TRENDS IN ECUADOR
Francisco Roldan Perez
Perez Bustamante & Ponce
Quito

Francisco Roldan Perez was born in Ambato, Ecuador in 1954 and admitted to the Bar there in 1978. He received his Doctorate at Law in 1978 from the Catholic University of Ecuador and also studied at the Oxford Center, Oxford, England. His papers include "Incentives for Foreign Investors in Ecuador". He is an Assistant Professor, Foreign Investment Law, Catholic University. He has attended the Harvard Law School Negotiation Workshop and the American Graduate School of International Management, Advanced Management Program for Oil and Gas Company Managers. He is a Director of the Chamber of Industries of Pichincha and a Member of the National Modernization Council (CONAM). His practice areas are Oil and Gas law, Commercial law; Corporate law, and Foreign Investments. He speaks Spanish and English.

HISTORY OF THE OIL SECTOR IN THE LAST 25 YEARS IN ECUADOR

Since the large discoveries of crude oil in the early seventies, Texaco-Gulf wre working in Ecuador under an association contract. Gulf farmed out and CEPE (State Company, no called PETROECUADOR) formed a Consortium with Texaco, being the latter the operator.

1982: Amendments to the Law on Hydrocarbons Introducing the concept of the Risk Service Contract and thus allowing the incoming of new fresh Investment of oil companies to the Country

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1983-1986: Six Bidding Rounds, Fifteen Risk Service Contracts signed with the most important oil companies such us Oxy, Esso-Hispanoil, BP, Conoco-Chinese Petroleum-Diamond Sharmrock-Nomeco-Murphy, Texaco-Pecten, Braspetro-Elf-Britoil, Tenneco-CSX-Yukong, Elf-Braspetro-YPF, Petrocanada, Arco-Agip, Unocal-Union, Mobil, Arco-Agip

1993: New amendments to the Law on Hydrocarbons to introduce the concept of the Production Sharing Contract and also the opening of the service stations to the private sector.

1993-1995: Three Bidding Rounds, Ten Production Sharing Contracts signed with oil companies such us EDC, Amoco, Triton, Oryx, CGC, Perez Companc, Santa Fe

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1996: Most of the Risk Service Contracts were converted into Production Sharing Agreements.

2006: Declaration of caducity (unilateral termination) of the Production Sharing Contract with Oxy.

2006: New amendments to the Law on Hydrocarbons introducing the concept of the windfall production tax of 50% on the so-called "extraordinary" revenues of the oil companies.

2007: The current Government increased the percentage from 50% to 99%.

2008: New Constitution of Ecuador.

Strategic sectors are deemed to be energy in all of its forms, telecommunications, non-renewable natural resources, transportation and refining of hydrocarbons, the biodiversity and the genetic heritage, the radio-electric spectrum, water, and others as determined by law.

The State reserves the right to administer, regulate, control and manage the strategic sectors. The strategic sectors pertain to exclusive decision and control of the State.

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The State shall establish public enterprises for the management of strategic sectors, provision of public services, sustainable utilization of natural resources or public property, and development of other economic activities.

In order to participate in the management of the strategic sectors, the law shall define the participation of public enterprises in mixed enterprises where the State shall always have a shareholding majority.

The State may delegate its participation in strategic sectors and public services to mixed enterprises wherein it has a shareholding majority.

Exceptionally, the exercise of those activities may be delegated by the State to the private initiative and to the popular and solidary economy in such cases established by law.

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NATURAL RESOURCES

Non-renewable natural resources and, generally, products from the subsoil, mineral deposits and hydrocarbon reservoirs, substances of a...