June 25, 2008
Quito
The President requested the Ministry of Mines to complete the negotiations in July this year.
The new oil contracts that the Government intends to sign with private companies to stop foreign state a minimum income of 67.5 cents for every dollar exported, revealed the Ministry of Mines and Petroleum.
Currently, the country receives 82 cents for every dollar due to the implementation of Act 42, which requires contractors to give up 99% of its extraordinary profits (above the price the state set in each contract). This allocation is known as 99-1.
"Nothing can be better than 99-1," said a source at the Ministry, but warned that if companies do not invest "in one or two years that income is at zero" because there would be no surplus to distribute. Thus stated that 67.5% obtained at least in the renegotiation is not as bad as it seems.
Last week, President Rafael Correa called on the authorities sign oil, more than one month, the new contracts which will jump from participation model to service delivery.
Galo Chiriboga, Minister of Mines and Petroleum, offered to "respect the agreements reached at the negotiating table", except in the term. The oil pose modify their contracts in two years, the government proposal is one.
The annual contract services for exploration and exploitation of hydrocarbons, "as termed the draft, projected long-term benefits, according to the source. For example, provided new investments of oil per $ 1,000 million and required (to maintain production this year) for $ 1,300 million.
The Ministry negotiated, in addition, an internal rate of return for companies (recovery of their investments) of 13.2% on average.
Prices foundations of the new contracts will also be key. The government already agreed with Repsol and Perenco amounts that serve as reference for the new distribution: 70% for the state and 30% for oil. That will replace the current formula 99-1.
For example, with Repsol and Perenco the base price agreed is $ 42.5 (readjustable according to U.S. inflation and the global oil industry). On this value will be carried out distribution of 70-30, which consist in new contracts. Petroriental set a price of $ 53.
These values were established despite the fact that oil companies demanded that the price is based on 60 or $ 70 per barrel.
Following the dialogues, which began in February this year-it was agreed that the involvement of the State, as regards the production of crude is 25% at least, compared to the current 12.5%.
The analyst Luis Arauz, however, does not consider the beneficial exchange of contracts. He assured that "the only way to achieve benefits for the state is staying with the oil and extracting it directly (through Petroecuador), the rest is a farce."
To close the negotiation still lack the acceptance of the agreements by companies and the favourable reports of Petroecuador, the Ministry of Mines and the Chief of Joint Command of the Armed Forces. The Special Committee Tender Petroecuador give the final approval.
Details: Production
Companies
Last May, production of private was 499 thousand barrels per day.
Contracts
The negotiations began four months ago.
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