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Viewing cable 10QUITO87, Ecuador's Minister of Non-Renewable Natural Resources
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Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
10QUITO87 | 2010-02-17 14:25 | 2011-08-30 01:44 | CONFIDENTIAL | Embassy Quito |
VZCZCXYZ0000
RR RUEHWEB
DE RUEHQT #0087/01 0481425
ZNY CCCCC ZZH
R 171425Z FEB 10
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC 0989
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHBO/AMEMBASSY BOGOTA
RUEHCV/AMEMBASSY CARACAS
RUEHGL/AMCONSUL GUAYAQUIL
RUEHLP/AMEMBASSY LA PAZ
RUEHPE/AMEMBASSY LIMA
RUEHQT/AMEMBASSY QUITO
RUEHSG/AMEMBASSY SANTIAGO
C O N F I D E N T I A L QUITO 000087
SENSITIVE
SIPDIS
DEPT FOR WHA/AND AND EEB/ESC/IEC
E.O. 12958: DECL: 2020/02/17
TAGS: ECON EPET EMIN SENV ETRD EFIN USTR EC
SUBJECT: Ecuador's Minister of Non-Renewable Natural Resources
Reveals Little on GoE Oil and Mining Policies
REF: 09 QUITO 1080; QUITO 05
CLASSIFIED BY: Heather Hodges, Ambassador, State, Exec; REASON:
1.4(B), (D)
¶1. (C) Summary. During a February 2 courtesy call with
Ambassador, Minister for Non-Renewable Natural Resources Germanico
Pinto reiterated the GoE's intention to focus on partnerships with
foreign state-owned companies for exploration and development
within the mining and petroleum sectors, but insisted that good
opportunities existed for U.S. companies in the sale of services
and equipment. Pinto also confirmed the Navy should complete its
hand-over of management of Petroecuador by the end of March 2010.
Pinto said that as part of the Ministry's judicial process to
review/terminate the government's contract with Noble Energy's
natural gas subsidiary EDC, the company must submit documentation
supporting its position. He claimed the Ministry typically was
disposed to finding a resolution to such disputes rather than
seeking a legal outcome. In an exchange on the Yasuni-ITT
conservation initiative, Pinto expressed optimism about eventual
success, despite the GoE's failure to gain its acceptance during
the Copenhagen Climate Summit and subsequent resignation of the
GoE's negotiating team (ref A). However, he was unable to identify
changes that would make the GoE's proposal more attractive from a
donor's perspective. End Summary.
¶2. (SBU) The Ambassador discussed a wide range of issues with
Minister for Non-Renewable Natural Resources Germanico Pinto on
February 2. Pinto, who has a background in electrical engineering
and software design, was named Minister of Mining and Petroleum in
June 2009; the Ministry changed names several months later. Pinto,
a member of the ruling political party Alianza Pais, previously
served in the Constitutional Assembly and as deputy in the
Coordinating Ministry for Strategic Sectors.
Petroleum Sector
¶3. (SBU) First turning to the petroleum sector, Pinto claimed the
Navy's turnover of management of state oil company Petroecuador was
proceeding in an organized manner and that the Navy would
relinquish control of the company by the end of March. (The Navy
has been running Petroecuador since November 2007). Pinto said the
framework for reorganization of Petroecuador was based on the
Public Company Law and on a study performed by the Wood Mackenzie
consulting firm. As a part of the reorganization, Petroecuador's
subsidiaries (Petroproduccion, Petroindustrial, and
Petrocomercial), which currently operate more or less
independently, will be converted into separate divisions within
Petroecuador. The entire reorganization is not expected to be
completed until the end of 2010.
¶4. (SBU) On foreign investment in the petroleum sector, Pinto
reiterated the GoE's intention to pursue exploration and
development within the sector primarily through "strategic
alliances" of Petroecuador with other foreign state oil and gas
companies. Pinto added, however, that numerous opportunities exist
for private U.S. companies in the supply of services and equipment
as the GoE ramps up investment in this sector; he mentioned the
Refinery of the Pacific as a specific example, despite the
construction contract being awarded to a South Korean firm. Pinto
noted that Ecuadorian legislation allows for "fast-track"
government procurement for strategic projects, including
exploration and development activities within the petroleum sector.
Pinto emphasized that bids for services or equipment that included
financing would be viewed most favorably, and would enable the
purchase process to proceed most quickly. Pinto mentioned that a
U.S. firm had won a contract to supply gas storage equipment to the
Ecuadorian Petroleum Fleet (FLOPEC). (Post does not have details
about this sale.)
Mining
¶5. (SBU) Pinto briefly reviewed the state of play in the mining
sector, noting that existing, large mining concessions were still
in the exploratory phase. Pinto explained that a framework for
further development of the sector had been established with
Ecuador's new mining law and implementing regulations, as well as
regulations covering environmental issues and small mining. He
mentioned the recent creation of the state mining company, Enami,
and said one of its major roles would be to manage strategic
alliances with other foreign state mining companies. Pinto
suggested that even though there were no U.S. investors currently
active in the mining sector, export opportunities would exist once
concession holders moved into a development/extraction phase.
Noble/EDC Dispute with GoE
¶6. (C) The Ambassador stated that Noble Energy's subsidiary EDC's
investment dispute with the GoE should be dealt with in a fair and
impartial manner. Pinto said the matter was being considered
within the Ministry. He declined to offer any details, but claimed
his ministry was disposed in general to resolving disputes with
private companies rather than seeking legal solutions.
[Background: On January 22, the Ministry officially accepted a
recommendation from Petroecuador to initiate a process to terminate
EDC's gas concession off the coast in Block 3, claiming EDC had not
complied with investment commitments within its contract. Within
60 days from that date, EDC must provide information to the
Ministry and Minister Pinto is supposed to render a final decision.
(Note: as part of its written contract, Noble/EDC may not seek
diplomatic mediation regarding the dispute. For more details on
the dispute see ref A. End Note.) ]
Yasuni-ITT
¶7. (C) Pinto expressed optimism about the eventual success of the
GoE's Yasuni-ITT conservation initiative, despite the GoE's failure
to gain international support for the proposal during the recent
Copenhagen Climate Summit, and the subsequent resignation of the
GoE's negotiating team, including the Foreign Minister, over
criticism by President Correa over "conditions" they were willing
to accept from international donors (ref B). Pinto was unable to
explain to the Ambassador in what way the GoE was planning to
modify its proposal to generate greater interest by potential
international donors. The Ambassador pointed out that financial
support was rarely given without conditions that ensured the funds
would be used as intended. Pinto noted the initiative was a
10-year proposal and claimed the fund for the initiative would be
structured so that donors would be able to retrieve their
contributions should a future Ecuadorian government decide to
develop the oil tract. He also suggested that there were private
groups within the United States that might want to participate,
even if the USG did not. [Note: President Correa named former
Ambassador to the United States, Ivonne Baki, on February 2 as the
head of a new negotiating team.]
Comment
¶8. (C) Pinto was cordial and took pains to emphasize ways in
which U.S. companies could participate in both the mining and
petroleum sectors. However, the message was clear and consistent
with President Correa's agenda, that the GoE exert maximum control
over these two sectors and pursue development primarily, if not
exclusively, through strategic partnerships with state companies of
"friendly" countries, i.e., not through foreign private investment.
On the Yasuni-ITT initiative, it is difficult to understand the
basis for Pinto's confidence. Nonetheless, the GoE seems intent to
plow ahead in high profile fashion as it starts anew to pitch its
proposal to potential international donors. The first stop on the
new team's international roadshow is Iran, and then other Middle
Eastern countries (septel).
HODGES