QUITO (AFP) — Leftist President Rafael Correa Thursday announced that Ecuador will keep 99 percent of windfall oil profits, changing a law that called for an 50-50 share with foreign oil companies of profits stemming from rising oil prices.
By a new decree "it is established that 99 percent of the windfall oil profits will go to the state and the remaining one percent to companies," Correa said.
The president said the previous law had to be changed because "its not enough for Ecuador to get 50 percent" as in the past.
He said the new law puts an end to "the distribution system by which for every 100 barrels of oil, the country (Ecuador) would only keep between 46-48 barrels."
In July 2006, Correa's predecessor Alfredo Palacio slashed foreign oil companies windfall profits from Ecuadoran oil sales to 50 percent. The United States in response called off negotiations on a free trade agreement with Ecuador.
Since his election in November 2006, Correa has refused to resume trade talks with Washington and questioned the 50-50 sharing deal with foreign oil companies.
Foreign oil "companies still make extraordinary profits, making the current contracts unfair for the Ecuadoran state," said the presidential decree signed Thursday.
Correa, the decree added, deemed it "necessary to regulate such profits more fairly and decided to change the law to reduce from 50 percent to one percent the oil widfall profits" for foreign oil companies.
The new law comes as Ecuador was renegotiating contracts with five foreign oil companies from Brazil, China, Spain, United States and France to reflect Palacio's decision.
Energy Minsiter Galo Chiriboga said the negotiations were being conducted in a friendly atmosphere.
Industry sources said the current contracts, most of which run out in 2012, allocate Ecuador only 20 percent of windfall profits.
There was no immediate comment from foreign oil company officials to Correa's 99 percent announcement.
Correa, whose ruling coalition on Sunday won majority control of a Constitutional Assembly that in six months is to draw up a draft constitution reflecting his socialist reform program, said the new contracts would adhere strictly to Ecuadoran law.
He stressed the new law is not about nationalizing the country's oil industry.
Government officials said they hope to convince foreign oil companies to continue doing business with Ecuador, whose Correa administration is increasingly being compared to leftist Venezuela and Bolivia, where oil companies have also been forced to renegotiate their contracts.
Copyright © 2009 AFP. All rights reserved. More »
