Mindo, Ecuador – Environmentalists in this cloud forest of
northern Ecuador still dream of halting construction of a
new oil pipeline that the builders said could bring
spectacular wealth to this poor Andean country. But with
the 300-mile-long, privately financed pipeline now 70
percent complete, and long green tubes replacing the palm
and canelo trees, even the most die-hard opponents
acknowledge that stopping the construction is next to
impossible.
The announcement this month that the big Düsseldorf bank
Westdeutsche Landesbank Girozentrale, or WestLB, would
continue financing the project, despite an international
campaign pressuring it to withdraw a $900 million loan,
appeared to remove the last hurdle for the builders of the
$1.3 billion pipeline.
“Now, it’s full speed ahead,” said Ian Davidson, local
director of Bird Life International, a conservation group
that had opposed the project.
After two years of acrimony by a strong, well-organized
opposition that frequently disrupted construction, such
admissions could not be more welcome for the consortium of
multinational oil companies building the heavy-crude
pipeline, known by its Spanish initials, O.C.P.
But now, as the project enters its final stage, with the
builders promising that the pipeline will be on tap next
June, questions are being raised by oil analysts and
economists over just how much economic impact it will have
in Ecuador.
Two years ago, when President Gustavo Noboa and the oil
companies began talks for the O.C.P., it was billed as a
mega-project that would, in time, help double national
daily oil production to 850,000 barrels, and help gross
domestic product grow as much as 2.3 percent a year over
the next 20 years.
But now, the government and the consortium – made up of
giants like Repsol YPF of Spain and Occidental Petroleum of
Los Angeles, and led by EnCana of Canada – have scaled back
the projections.
The builders now say the pipeline will, for the foreseeable
future, transport only 220,000 barrels a day, half of
capacity. And nearly three-quarters of that crude is oil
that is already in production and currently flowing through
the country’s only other major pipeline, the 30-year-old
Trans-Ecuadorian tube known as SOTE, which runs nearly
parallel to the new pipe.
More exploration is expected to increase production, but
the process is lengthy and expensive. This means that for
at least a few years, only a few thousand more barrels of
oil will be produced.
“All we are going to get is 15,000 barrels a day for the
first three years after the pipeline is commissioned,” said
René Bucaram, president of the Ecuadorean Petroleum Opinion
Forum, an influential policy analysis group in Quito.
“That’s a disaster.”
Gustavo Arteta, an Ecuadorean economist for LatinSource, a
consultancy based in New York, said Ecuador’s policy makers
are now just hoping that production will eventually
increase from the current 400,0000 barrels a day to 600,000
– more than 200,000 short of the initial goal.
“The reality of the circumstances is that we will wait
several years as a country to get there,” Mr. Arteta said
in a recent interview in Quito.
Such talk irks Energy Minister Pablo Terán, who believes
that Ecuador can one day transport a million barrels a day,
most of it for export, making it nearly as important a
supplier as oil-rich Venezuela.
The new pipeline, he said, will mean more production
because the resolution to the thorny problem of
transporting oil from the eastern fields of Ecuador to
Pacific ports will spur large-scale investment in
exploration.
Mr. Terán says that new blocks like the Ishpingo,
Tambococha and Tiputini fields have world-class potential,
and that big companies, including Statoil of Norway,
TotalFinaElf of France and the Royal Dutch/Shell Group,
have shown an interest.
He also notes that Ecuador signed a “ship or pay” clause
with O.C.P.’s builders, requiring that the companies pay
the government for the transporting of at least 390,000
barrels of oil a day, regardless how much is actually
produced – a contract that he says will also encourage
exploration.
Ecuador is an important player in the Latin American oil
market. It has 2.1 billion barrels of proven oil reserves,
and its fields in the eastern Amazon are the most developed
in all of Amazonia.
“It’s a good basin,” Andy Patterson, O.C.P.’s project
director, said. “I don’t think Ecuador could produce a
million barrels a day, but I could see it producing 600,000
to 700,000 barrels a day.”
Still, exploration has fallen short because multinational
oil companies have cut back on investments, in large part
because of Ecuador’s decision last year to charge a
value-added tax on oil companies, a tax that had previously
been refunded.
Investors worry about Ecuador’s consistently troubled
economy and its traditional political instability, with
some increasingly jittery about the possibility that a
left-leaning candidate will win next month’s presidential
election.
“Ecuador is a difficult place to do business,” Mr.
Patterson said.
Indeed, the fact that it took about a dozen years of
proposals and counterproposals for a pipeline project to
come to fruition is “evidence of the pervasiveness of
corruption and some of the problems that face private
investment here,” said an official at the American embassy.
Here in the heart of the 47,000 square-acre Mindo Nambillo
cloud forest, word that the pipeline may not become the
promised economic panacea, at least in the short term, has
many local people shaking their heads. For so long, as they
tried to stop the pipeline, they were told they were
blocking a project crucial to the economy.
Their concern was that the pipeline would tear through the
region, which has 450 species of birds – half as many as
all the species in North America – and many types of
butterflies, orchids and trees, and is an important
eco-tourist destination.
But little by little, government resolve for the pipeline
led environmentalists and tour operators to drop the fight,
with some saying they decided it was best to negotiate with
the builders to ensure that the work did as little damage
as possible.
“I still think it’s completely wrong to go through this
area,” said Richard Parsons, a British transplant here who
runs a 10-room bamboo lodge overlooking a sea of green. But
Mr. Parsons has allowed the pipeline to go through his
property.
“It hurts when I go and see it,” he said, “but I have to
admit, it’s not as bad as I thought it would be.”
The builders have promised to use mule trains and a special
elevated pulley system to move equipment as they lay the
pipeline through eight ecologically sensitive miles.
Tractors and other heavy machinery are out, and the
right-of-way in which they are allowed to work narrows to
just 23 feet here, down from the 49 feet used in other
parts of the country.
There are still deep concerns, mainly that seismic activity
could cause a break and an oil spill. But most of the
environmentalists are now focused on future exploration in
the Amazon.
“The controversy of the O.C.P. does not finish with the end
of the construction,” said Natalia Arias, who has
coordinated the campaign against the pipeline for
Ecological Action, an Ecuadorean group. “There is a goal to
fill the pipeline, and to do this, they have to increase
production, and that means opening up new areas of Amazonia
to oil production.”
