Ecuador's Aggressive Amazonian Oil Push

by Kevin Koenig, Amazon Watch

Last week, the Ecuadorian government announced that it had begun constructing the first of a planned 276 wells, ten drilling platforms, and multiple related pipelines and production facilities in the ITT (Ishpingo-Tambococha-Tiputini) oil field, known as Block 43, which overlaps Yasuní National Park in Ecuador's Amazon rainforest. Coupled with the recent signing of two new oil concessions on the southern border of Yasuní and plans to launch another oil lease auction for additional blocks in the country's southern Amazon in late 2016, the slated drilling frenzy is part of a larger, aggressive move for new oil exploration as the country faces daunting oil-backed loan payments to China, its largest creditor.

Yasuní National Park is widely considered one of the most biodiverse places on the planet. It has more species per hectare of trees, shrubs, insects, birds, amphibians, and mammals than anywhere else in the world. It was designated a UNESCO Biosphere Reserve in 1989, and it is home to the Tagaeri-Taromenane, Ecuador's last indigenous people living in voluntary isolation.

The controversial drilling plans were met with protest at the Quito headquarters of state-run Petroamazonas, the company charged with developing the field. Ecuador averaged a spill per week between 2000 and 2010, which doesn't bode well for drilling in a national park.

Despite touting the new perforation, the government is on the defensive, trying to downplay impact on the park. It points to the fact that the well site, Tiputini C, is technically outside of Yasuní's limits. But, as the first wildcat well of hundreds planned, the government's rhetoric is misleading at best.

President Rafael Correa also boldly claimed that drilling in the adjacent Block 31 concession was not inside the boundary of Yasuní National Park, followed by a press conference from Environmental Minister Daniel Ortega who reiterated that claim. But activists are crying foul.

"The government is lying," said Patricio Chávez, a member of Yasunídos, a national collective dedicated to defend Yasuní National Park. "They have no idea what they're talking about. We're not sure whether they make these statements because they honestly don't know their own country or they're trying to intentionally confuse people."

In fact, Block 31 is in the heart of Yasuní National Park, with the two oil fields clearly in the middle of the block. The Ministry of Hydrocarbons' own map shows a pipeline extending to the Apaika field—in the middle of the block and the heart of the park.

Conveniently for the government, though, both Block 31 and Block 43 are highly militarized, and entrance by the public is forbidden. But satellite images and investigative undercover missions into the area not only show oil activity underway but also the construction of illegal roads in violation of the environmental license.

In fact, there are currently eight oil blocks that overlap Yasuní National Park, which calls into question the relevance of its "national park" status with so much drilling either underway or planned.

"The park and its indigenous peoples are under siege," said Leo Cerda, a Kichwa youth leader and Amazon Watch field coordinator. "If this is how a national park is treated, imagine what drilling in an 'unprotected' area looks like."

Expanding drilling activity in the park has left the nomadic Tagaeri-Taromenane virtually surrounded. Recent conflicts between the two clans and their Waorani relatives has led to several killings and other inter-ethnic violence. While there are different theories as to the roots of the confrontations, dwindling territory, scarce resources, noise from oil activity, and encroachment by outsiders are all likely factors. Regardless, so much pressure on the park and its inhabitants is having predictable and tragic consequences.

The drilling plans have been a flashpoint since 2013 when President Correa pulled the plug on the Yasuní-ITT initiative, a proposal to permanently keep the ITT fields—an estimated 920 million barrels of oil—in the ground in exchange for international contributions equaling half of Ecuador's forfeited revenue.

The initiative failed to attract funds, in part because Annex I countries were unwilling to contribute to an untested supply-side proposal to keep fossil fuels in the ground instead of more traditional demand-side regulations and carbon offsets. Essentially, northern countries—the most responsible for climate change—were unwilling to cough up cash to protect one of the world's most important places if they weren't going to get anything in exchange.

Scientists now agree that we need to keep at least 80% of all fossil fuels in the ground to avoid a catastrophic 1.5℃ rise in global temperature, so Ecuador's proposal was apparently ahead of its time. The world dropped the ball, but the blame for the initiative's stillbirth is shared.

The Correa administration mismanaged the initiative from the outset. It took several years to establish a trust fund where people and governments could contribute. But more detrimental was the administration's simultaneous tender of multiple oil blocks in the country's southern Amazon. Why pay to keep oil in the ground in one place if the host country government merely opens up new areas to compensate for lost revenue? Correa's have-your-cake-and-eat-it-too politics were not very convincing to potential donors.

Public outrage and protest met Correa's unilateral decision to scrap the initiative. A six-month national mobilization to force a ballot initiative on drilling plans garnered over 700,000 signatures, far more than the required 400,000. But almost half were nullified by Ecuador's National Election Council in a process littered with secrecy and fraud.

"When the Yasuní-ITT initiative was launched, the idea was that leaving the oil in the ground would help address environmental and economic problems on the local, national, and global level," said Esperanza Martínez, president of Ecuador's Acción Ecologica and founder of the Oilwatch network. "The abandonment of the initiative has come with an aggressive push on Yasuní—on its borders to the north, south, east, and west. But the decision to drill now comes at a time when the world is talking about breaking free of fossil fuel dependence and agreeing on targets to avoid the rise of global temperature."

Martínez continued, "It makes no sense to drill now—at great biological and cultural risk—when economically Ecuador is losing money with each barrel extracted. There is no justification that drilling in Yasuní is in the economic interest of the country."

Indeed, it costs Ecuador $39 to produce a barrel of oil. But current market price for its two types of crude are in the low $30s, so Ecuador is losing money on each barrel being pulled from the ground. And when the above-ground ecosystem is one of the most important in the world and drilling activities threaten the ethnocide of isolated peoples, drilling at a loss is bewildering. Of course, there is no price per barrel that would justify drilling in such an environmentally pristine and culturally sensitive area, with the extinction of a people at risk.

A major factor in Ecuador's drive to expand drilling in Yasuní and beyond, despite the current oil market context of abundant and cheap oil, is the country's outstanding debt to China. According to a Boston University/Inter-American Dialogue Database, Ecuador has obtained 11 loans, totalling about $15.2 billion, much of which must be paid back with petroleum.

But the move into Yasuní coincides with an equally aggressive push to open new areas south of Yasuní in a large, roadless pristine swath of forest that extends out to the Peruvian border.

Two blocks, 79 and 83, were recently concessioned, and drilling deals were signed with Andes Petroleum, a Chinese state-run firm. Faced with adamant opposition from both the Sápara and Kichwa peoples whose legally-titled territory overlaps these oil blocks, the government has sought to divide the indigenous communities.

Speaking at an Inter-American Human Rights Commission hearing this week, Franco Viteri, president of the Confederation of Amazonian Indigenous Peoples of Ecuador (CONFENAIE), described efforts of the government to divide the legitimate indigenous organizations with the aim of circumventing resistance to resource extraction and advancing Andes Petroleum's drilling plans.

"The objective of the government is to create acceptance—or the appearance of acceptance—of resource extraction. That's what the government wants, because we are resisting resource extraction projects like oil and mining throughout the Amazon region."

Manari Ushigua, president of the Sápara federation, whose territory is almost totally engulfed by Blocks 79 and 83, also addressed the government's intentions. "The goal of the Ecuadorian government is to divide us and open our land to oil extraction. We live in peace, with the natural world, with our spirits. But our elders are few. We are on the verge of extinction."

The government has also announced plans to launch a new oil licensing round in late 2016 which would sell off several other oil blocks in Ecuador's southern Amazon. However, the last auction, known as the 11th Round, was a widely recognized failure. Offering thirteen blocks, the government only received four bids, two of those from the same company—Andes. Clearly, the Chinese state-run firm wants to make sure that its sole shareholder, the Chinese government, gets paid back for its generous lending to Ecuador. And because the payments are in oil, it explains why Ecuador is forced to expand drilling, even if it's at a loss. China can then turn around and sell the barrels of oil in the open market for a substantial profit.

Ecuador's new oil boom is ill-timed. While several years ago the country was the vanguard of what is now a worldwide movement to #keepitintheground, Correa's "Drill, baby, drill!" policies place its frontier forests and indigenous peoples at great risk. Ecuador's pipe-dream of prosperity from perforating wells like ITT have failed to pan out, instead trapping the country in a downward spiral of debt, dependency, and environmental destruction.

However, the movement to #keepitintheground in Ecuador is growing. Ecuador's 11th Oil Round failed mostly because communities on the ground vowed resistance and indigenous leaders traveled to every oil expo at which the government sought to sell its Amazon oil blocks to the highest bidders—including Quito, Houston, Paris, and Calgary—and let any interested company or investor know that their lands were not for sale. Indigenous peoples across Ecuador's Amazon have again vowed to keep the companies out and they are asking for our solidarity. Let's join them!

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This story first ran April 6 on Amazon Watch.

Photo: Aerial view of Ecuador's Amazon. Credit: Amazon Watch.

From our Daily Report:

Ecuador: general strike, indigenous march on Quito
World War 4 Report, Aug. 13, 2015

Ecuador violates prior consultation: Amnesty
World War 4 Report, June 8, 2013

Activists divided on Paris climate accord
World War 4 Report, Dec. 12, 2015

Rival trade pacts vie for Pacific hegemony
(on China-Ecuador debt-for-oil swap)
World War 4 Report, June 1, 2016

See also:

ENEMY OF THE STATE
The Battle Over Sustainable Development in Ecuador's Intag Valley
by Gerard Coffey, La Linea de Fuego
World War 4 Report, January 2014

MARX AND EXTRACTIVISM IN LATIN AMERICA
by Joan Martínez Alier, EcoPortal.net
World War 4 Report, March 2013

BOLIVIA: THE POLITICS OF EXTRACTIVISM
by Devin Beaulieu and Nancy Postero, Against the Current
World War 4 Report, November 2013

WHY U.N. CLIMATE TALKS CONTINUE TO FAIL
by Chris Williams, The Indypendent
World War 4 Report, September 2014

CHINA SYNDROME
China's Growing Presence in Latin America
by Carmelo Ruiz Marrero, Americas Program
World War 4 Report, July 2011

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Reprinted by World War 4 Report, April 8, 2016