June 2019 – @alvaroriosroca – Corruption is an execrable scourge that scourges humanity. It makes wealth concentrate on the few and poverty on the many. It generates discomfort and distorts fundamental values such as effort, study, innovation and hard and honest work.
If we add to the existence of corruption projects executed by State companies with ineptitude, quality deficiencies, non-productive and sustainable due to lack of markets, the impact on citizens is tremendously perverse. This has happened in the Ecuadorian energy sector.
We evidenced the construction of eight hydropower plants with the lack of technical studies including the local forecasted demand. Many with construction problems such as Toachi Pilaton (fissures). As there was an oversupply, the government tried to implement a program of induction stoves to replace cooking gas (imported propane) with electricity. A resounding failure because the electricity distribution networks had to be reinforced. Improvisation after improvisation.
In hydrocarbons sector, the works undertaken by Petroecuador in the Esmeraldas and Pacific refineries, the natural gas liquefaction plant of Bajo Alto, the Pascuales – Cuenca pipeline and the Monteverde – El Chorrillo LPG complex have been detected more of the same, works with very poor quality and corruption in all contracts. In addition, there are ongoing investigations and there are detainees.
It is important to remember that many of those projects were financed with future oil production, seizing the country and putting the president Moreno in a very weak position to rule the country. The current critical economic situation with total debt (external and internal) inherited to 2018 amounting to $50 billion dollars.
Since the State companies cannot pay the debt, Petroamazonas, Petroecuador, Celec and other state controlled enterprises are owed and/or without flow, there is nothing left but to carry out the so criticized and unwanted structural reforms in order not to enter into a serious default.
As a consequence of this economic situation, subsidies have been removed from gasoline except for Standard and diesel (it is maintained for sectors such as shrimp farmers).
Changes are introduced now in the Exploration and Production oil contracts returning them to contracts of participation of contracts making them more attractive for investors. It is important to highlight, that under Correa administration, E&P contracts were changed under a tariff model in which Correa Administration captured a lot of take of the rent (high oil prices), but it wounded of death the exploration in Ecuador.
In 2020, additional adjustments will be made between privatizing and/or granting business units of State Enterprises. Petroecuador and Petroamazonas are being joined again. The Pacifico refinery (a major scandal in association with PDVSA) should be addressed by the private sector if feasibility permits. Some constructed hydropower plants and other assets are to be privatized and/or granted concessions. There is much more that space does not allow for expansion.
It is not only Brazil that is in this process in the energy sector, now Ecuador follows, and Venezuela will have to do it at some point. Ineptitude and corruption when it comes to projects and investments executed by state-owned companies are unfavorable to the well-being of a country’s citizens.
* Former Minister of Hydrocarbons of Bolivia and Current Managing Partner of Gas Energy Latin America