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Petroleum industry

Ecuador's Energy Reform Bill in Turmoil After Constitutional Tribunal Strikes Down Key Provisions

Strategic Insights

— 1 min read

Ecuador's plans for economic recovery are under threat after a significant portion of the government's "Trole II" energy reform bill was deemed unconstitutional by the country's constitutional tribunal. President Gustavo Noboa has accused the court of staging a "boycott against national development". The tribunal has ruled that 40 articles of the bill are either partially or fully unconstitutional, including measures that would allow private investors to take operational control of PetroEcuador's top five oil fields. These fields hold significant reserves of 1.595 billion barrels of oil, but output has been declining at a rate of 7.5% per year over the last six years.

Key Takeaways:

  • 40 articles in the "Trole II" energy reform bill have been deemed unconstitutional by the constitutional tribunal, including measures that would allow private investors to take operational control of PetroEcuador's top five oil fields.
  • The tribunal has also rejected government plans to raise the ceiling on private sector participation in state-owned generator Hidropaute to 51% from 49%.
  • The court's ruling has created a major obstacle to Ecuador's economic recovery program, which is being assessed by an IMF mission this week.
  • The ruling further tarnishes Ecuador's already fragile investment image.
  • A suspected bomb attack on the main Sote pipeline on December 9 has also raised concerns among oil investors, with 1,200 barrels of oil spilling into the Aguarico river.
  • Repairs to the pipeline were completed on December 11.
  • Local criminal gangs or Colombian guerrilla group Farc are suspected of being behind a kidnapping of 10 foreign oil workers in the same area in October.

Statistics:

  • 40 articles in the "Trole II" energy reform bill deemed unconstitutional (Fausto Garzes, general-secretary of the constitutional tribunal source).
  • 1.595 billion barrels of potential oil reserves in the top five oil fields (Sacha, Shushufindi, Auca, Libertador and Cononaco fields).
  • 7.5% annual decline in oil output over the last six years.
  • 1,200 barrels of oil spilt into the Aguarico river following a suspected bomb attack on the main Sote pipeline.
  • 10 foreign oil workers kidnapped in the same area in October, with two subsequently escaping.

Sources:

  • ALE (Album Liquidacion), 1 November, p3
  • ALE, 18 October, p3
  • ALE (Album Liquidacion), 17 August (Trole II bill)

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