VZCZCXYZ0010
RR RUEHWEB

DE RUEHQT #0259 0741810
ZNR UUUUU ZZH
R 141810Z MAR 08
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC 8626
INFO RUEHBO/AMEMBASSY BOGOTA 7442
RUEHCV/AMEMBASSY CARACAS 2949
RUEHLP/AMEMBASSY LA PAZ MAR LIMA 2485
RUEHGL/AMCONSUL GUAYAQUIL 3405
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS QUITO 000259 
 
SIPDIS 
 
SIPDIS 
 
TREASURY FOR MEWENS 
 
E.O. 12958: N/A 
TAGS: ECON EPET EINV SENV EC
SUBJECT: ECUADOR ECON WEEKLY:  ECUADOR TO PAY OXY VAT AWARD; GOE 
SIGNS THREE MARGINAL OIL CONTRACTS; "ITT" TOUR 
 
¶1.  (U) The following is a weekly economic update for Ecuador that 
reports notable developments that are not reported by individual 
cables. 
 
Ecuador Announces Publicly It Will Pay OXY 
------------------------------------------ 
 
¶2. (U) On March 12 the Ecuadorian media reported that Ecuador had 
lost its final appeal in an international arbitration case, which 
had ruled that the GOE needs to rebate valued-added taxes paid by 
Occidental Petroleum Corporation (Oxy).  While the House of Lords 
had rejected Ecuador's final appeal in November, this was the first 
time the ruling (and the GOE's commitment to pay) has been made 
public.  Minister of Economy and Finances Fausto Ortiz confirmed 
publicly that the GOE will pay the arbitral award, although subject 
to discussions and negotiations with Oxy. 
 
GOE Signs Three Oil Contracts 
----------------------------- 
 
¶3. (U) On March 12, the GOE signed oil contracts for three marginal 
fields, the first petroleum concession contracts signed in nine 
years.  The marginal fields are small (less than 1% of total 
production), contain low quality or heavy crude, and can require 
expensive extraction techniques.  The contracts establish that the 
percentage of state participation will increase as the international 
price of oil increases.  The contracts are for 20 years, and 
production is scheduled to start in April. Two fields will be 
operated by the Amazonian Oil Partnership (Ecuadorian company Dygoil 
and the Venezuelan companies Proinci, NCT Energy, NCT Estudios y 
Proyectos, and Suelopetrol), with an estimated investment of $55 
million.  The Pegaso Oil Partnership (Colombian company Ismocol and 
U.S. company Pecs Iecontsa) will operate the third field, with an 
estimated $53 million investment. 
 
¶4. (U) The GOE continues to negotiate new contracts with the large 
foreign oil companies that have production sharing concessions, 
which will be reported septel. 
 
Former Foreign Minister Embarks on "ITT" Tour 
--------------------------------------------- 
 
¶5.  (U)  Following on President Correa's extension of the deadline 
for his "Keeping the Oil in the  Ground" proposal (in January he 
further postponed commercial development of the Ishipungo Tambococha 
 Tiputini -ITT field in Yasuni National Park until October, instead 
of June), ex-Foreign Minister Francisco Carrion this week embarked 
upon a tour to Europe this week to market the benefits of the GOE's 
plan to trade debt in exchange for not drilling for oil. 
 
JEWELL