VZCZCXYZ0015
OO RUEHWEB

DE RUEHQT #1497/01 1801317
ZNY CCCCC ZZH
O 291317Z JUN 07
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7319
INFO RUEHGL/AMCONSUL GUAYAQUIL PRIORITY 2512

C O N F I D E N T I A L QUITO 001497 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 06/29/2017 
TAGS: EAGR EC EFIN EPET PREL SENV
SUBJECT: ECUADOR'S BIG ENVIRONMENTAL INITIATIVE: KEEPING 
THE OIL IN THE GROUND 
 
REF: QUITO 1102 
 
Classified By: DCM Jefferson Brown, reasons 1.4 (B) and (D). 
 
¶1.  (U) Summary:   President Rafael Correa is challenging the 
world to help Ecuador avoid drilling for oil in one of its 
largest and most biodiverse areas of protected Amazon 
rainforest, the Ishpingo-Tambocoha-Tiputini (ITT) field in 
Yasuni National Park.  The GOE wants the international 
community to compensate it for half of the profits it 
estimates it would earn from ITT development, or $1.75 
billion.  So far, however, it has not provided any sort of 
legal framework for its proposal.  It says it would place the 
funds into a trust managed by an international body, and sign 
agreements that it will not drill for the projected 920 
million barrels of heavy crude that lie underground.  End 
Summary. 
 
THE PROPOSAL 
------------------- 
 
¶2.  (U) The GOE officially presented &Keeping the Oil in the 
Ground8 at a June 5 World Environment Day celebration at the 
Presidency.  The GOE proposed to refrain from developing the 
ITT field if the international community would compensate it 
for half of the estimated profits resulting from development, 
or $1.75 billion (note: the press reported $350 million/year 
for the 25 year duration of the project, but this does not 
take into account the GOE's estimate that production will not 
become profitable until the fifth year of operation).   The 
showy event at the Presidency included children and 
indigenous groups (the ITT is home to uncontacted peoples 
such as the Hoarani), and a colorful photo exhibit of 
Ecuador's Amazon forests.  Cabinet members and even the 
President of Petroecuador all signed a large white poster in 
support of the initiative. 
 
¶3.  (U) A power point presentation by then Energy Minister 
Alberto Acosta listed possible funding sources as "foreign 
debt cancellation and trade off: multilateral (IADB, World 
Bank), bilateral, Paris Club; government to government 
donations, voluntary contributions from civil society, 
international NGOs (including conservation and human rights 
organizations), and international market placement of 
unexploited crude oil certificates."  The presentation 
illustrated Ecuador's wide biodiversity (more than 600 
different species per hectare) and showed photos of the kind 
of environmental damage that roads, exploration and drilling 
would create.  It also gave details about ITT oil: the field 
currently contains an estimated 920 million barrels * more 
than 20% of total Ecuadorian reserves.  Interested investors 
include the Chinese, the Brazilians, and Venezuelans. 
 
¶4.  (U) The GOE says it will place donated funds into a trust 
managed by an international body, and sign agreements that it 
will not develop the ITT.  Any interest generated will 
supposedly be used to fund social development networks.  The 
government plans to give the initiative one year to succeed 
* but if funds are not raised by that time, it says it will 
move forward with development. 
 
SAVE THE ITT, SLOW GLOBAL CLIMATE CHANGE 
--------------------------------------------- --------------- 
 
¶5.  (U) At a separate event on June 14, "Climate Change, 
Kyoto y Alternatives to Development," Ivonne Ramos of NGO 
Accion Ecologica said forgoing development of ITT would help 
Ecuador meet its Kyoto Protocol obligations.  She said that 
Ecuador's clean development initiatives were not numerous, 
but included 230 successful hydroelectric projects and 
efforts to address emissions (the Quito municipality 
participates in the UNEP-administered and EPA-sponsored Clean 
Fuels Partnership through its organization CORPAIRE).  She 
concluded that avoiding development would be a huge stride, 
and called the project "the only initiative by a country of 
the south" to propose a "concrete" remedy to global warming. 
Economist Carlos Larrea from the Universidad Andina Simon 
Bolivar added that if development of ITT (and the thermal 
refinery necessary to distill its heavy crude) proceeds, the 
net financial cost to the rest of the world in terms of 
climate change would be greater than Ecuador's profit. 
Acosta's presentation asserted the same, estimating that 
exploitation of the ITT would release 108 million tons of 
carbon into the atmosphere. 
 
COMMENT 
-------------- 
 
¶6.  (C) The $1.75 billion question with regard to Correa's 
ITT proposal is: what guarantee will the GOE provide that it 
will not develop the field?  The idea is innovative (perhaps 
inspired by carbon credits), but to the best of our 
knowledge, the GOE has not yet developed any legal framework 
to assure the international community that it will forgo 
development.  We question whether the GOE has the legal 
expertise, organizational ability, or long-term political 
will to see the project through.  The chief proponent of the 
proposal, former Energy Minister Acosta, resigned on June 14 
to run for the Constituent Assembly.  Meanwhile, 
Petroecuador's President, Carlos Pareja has been actively 
pushing for development of the ITT fields (reftel).  In an 
ironic twist, the same day the GOE unveiled its Keep the Oil 
in the Ground proposal, Petroecuador applied for visas for a 
delegation to travel to Washington to meet with possible 
U.S.-based developers of the ITT field.  Even so, the GOE 
proposal may attract some attention * the German DCM 
commented to EconCouns a couple of months ago that he was 
skeptical that the GOE would follow through with its 
commitment, but he more recently said that the German 
government may actually consider the proposal; Norway has 
also reportedly shown some interest.  End comment. 
 
JEWELL