Ebb and flow of the tide of oil

Ecuador has a long history of booms and busts, and now
the country appears to be buying in to another lost cause

By Sierra Bilton

Block 43 is Ecuador’s second largest oil reserve. Located in the rainforest of the Amazonas Oriente region of the country, it is better known as the ITT (Ishpingo-Tiputini-Tambococha) block, for its three large oil deposits.

Nearly all the oil lies under Yasuni National Park, an area teeming with animal, insect and plant life of uncountable variety, and which has been a protected UNESCO Biosphere Reserve since 1989. But it sits on more than 850 million barrels of heavy crude, and everyone wants a share.

This land makes scientists buzz and the country’s economy boom. 

According to Amazon Watch, an American NGO, the park holds world records for species of amphibians, bats, reptiles and trees. The area contains more native tree species in one hectare than in all of Canada and the United States combined. By comparison, the Rainforest Conservation Fund estimates thats 50 species of trees can be found north of the European alps, and fewer than 1,000 in all of North America. Yet, just one hectare of Amazon rainforest can hold more than 750 species of trees.

Kelly Swing is director of the Tiputini Biodiversity Biodiversity Station, which lies across the Tiputini river from Yasuni. He says he finds it difficult to reconcile conservation with oil extraction near the parkland, because the first corporate priority is profit, with the land and its people a long way down the list of priorities.

He compares his feelings about big oil with those of a father meeting his daughter’s first boyfriend: “What are your intentions with my daughter?"

 “We have this precious rainforest setting," he says. "And, yeah, what are you going to do there exactly? Are you going to make money for yourself and for this country, and make all possible efforts to do a good job?”

Swing says he finds it hard to be optimistic; as the recent leasing of oil rights in the ITT block shows, the companies continue to make their way in, without much local blessing.

Tiputini co-managers Diego Mosquera and Gabriela Vinueza say oil profits often end up hundreds of kilometres away in the major cities, or in foreign hands. The disconnect between the capital, Quito, and the Amazon is palpable, and missteps and failed plans in the region blow up worse than they might elsewhere in the country.

 “When you go to places in the Amazon, especially small cities, you wouldn’t think that the oil comes from here” Mosquera says. “Because they are not modern cities. They don’t see the result of all these activities.”

Former president Rafael Correa shook things up in 2007 with the Yasuni-ITT Initiative by offering to keep the oil in the ground if the international community reimbursed Ecuador US$3.6 billion for its value. But, six years later, after just $13 million was raised, Ecuador fell back on Plan B. Oil rights under Yasuni were leased.

All of this flies in the face of the fact that Ecuador was the first country to write the Rights of Nature into its constitution. But what is written is not always what is done. As Mosquera points out, Ecuador’s constitution also says no oil extraction is allowed in national parks.

“It’s complicated,” he says. “Because you have a bunch of laws that contradict each other. If the government says that this is for national interest, they can take it.”

Making promises

Oil companies employ departments of community relations to interact and negotiate with locals in an effort to make projects go smoothly, Swing says. 

“It’s more like a feudal system,” he says.

They promise the indigenous people health care, education, jobs and transportation in exchange for their support. However, this relationship is tenuous and tense.

Often, money only comes at the beginning of projects, Mosquera says, and leaders can be paid off to keep communities quiet. But these leaders regularly spend the payoffs on themselves. It’s a process that will resonate with aboriginal peoples around the world, who deal with corporate and government interests.

In Block 43, the oil company is also the government. The rights have been leased to the state-run oil company, PetroAmazonas. Using the neighbouring Block 31, also leased by PetroAmazonas, to lay infrastructure for access, the company began pumping oil from under Yasuni in late 2016.

This sort of directional and horizontal drilling technology will help to decrease the number of drill sites, because it allows for more wells per site, Paola Carrera, under-secretary with the Ecuadorean Ministry of Environment, recently told the ANDES News Agency. As well, he said, neither gas-flaring nor settlement would be allowed, and road construction would be rigorously controlled.

PetroAmazonas representatives have also pledged re-vegetation programs, as well as the creation of wildlife connections over and under roads.

Although the government and the company claim the drilling is causing minimal disturbance to the species that dwell above, interaction with outsiders frequently leads to angry response from the indigenous people, which can involve death threats, financial demands and even spear-killings. The two sides are trapped in an asymmetrical relationship that seems bound to repeat itself in the ITT block.

As for the local Huaorani people, they seem destined to be collateral damage of their country’s struggle with debt and recession.

“They’re probably going to end up in big cities when the oil companies are gone,” Vinueza says. “Living in the streets.”

Although the companies and the government promise great potential for sustainable resource extraction, Swing says, conservationists like him know that the rosy pictures rarely translate into reality, “because it costs something to do that.”

“Usually,” he says, “we’re talking about one thing on paper, and another thing that occurs in practice.”

This is something that mirrors pivotal policy change, says Diana Vela Almeida, a PhD candidate at Montreal's McGill University. A specialist in environmental policy, she is part of the university’s Ecological Economics Lab and Research Group.

“In 2009, the government changed the oil contracts,” she says. “Now you are selling us your services. We own the resources, and now we want 80 per cent (of revenues) because the resources are ours.”

One counter-argument is that there is a great deal of variation in behaviour among oil companies, she adds, often depending on the nation of origin and the policy follow-through practised. The game is changing and, though some companies employ public relations tactics to groom their images, others hold themselves to a higher standard.

Shifting perceptions

Over the past two decades, there has clearly been a shift in public attitudes towards resource exploitation and the environment. In Ecuador, though, there is the problem of the $11 billion debt the country owes to China, which considerably reduces any leverage Ecuador might have with oil companies from that country – something that threatens to resurrect the bad old ways of 1970s oil exploration by U.S. companies.

“If you look at the north of the Ecuadorean Amazon,” Mosquera says, “the forest is all gone, because they did the worst things you could imagine.”

Chevron operated the area and from these operations came many lawsuits charging lax environmental standards and subsequent lack of cleanup – one of which was decided in a Canadian court.

“There weren’t any environmental standards,” Mosquera says. “But now there are." 

When it comes to drilling oil in a rare and fragile place like Yasuni, there’s always going to be an impact, he adds, “but the impact can be reduced."

That takes dialogue and co-operation, says former Wildlife Conservation Fund director Esteban Suarez.

“I really think that we should work with oil companies, because they are a super-powerful player in these landscapes.

“So, if you just choose to ignore them or to exclude them from the conversation, you are basically excluding one of the most important players. And you lose the opportunity of engaging them, or probably influencing them in a positive way.”

Also, oil companies based in developed countries – such as Spanish Repsol and Cenovus from Canada – have become aware that they need to be environmentally responsible because their reputations depend upon it, Maclean’s magazine reports. For example, Cenovus is developing technology and extraction methods that do less damage to the environment, such as an exploratory drilling rig that can be flown in and out of remote areas by helicopter.

The problem in Ecuador is that many of the companies with higher, often self-imposed, standards of practice, left the country in the early 2000s, Swing says, after experiencing years of social and political uncertainty.

Now, most oil blocks are leased by state oil companies and Chinese subsidiaries.

“If you’re looking for the cheapest option on the market to extract oil in a place that is vulnerable,” Swing says, “you get what you pay for.”

As former finance minister Magdalena Barreiro says: “It is not the best companies and most serious companies that come and say, ‘I want to invest in Ecuador.’ That’s why the Chinese are so happy, you see. Because they can deal with this sort of underground negotiations.

“Chinese have the money, and they do not have all of the concerns about the public management, as U.S. or Canadian companies have in terms of corruption or mismanagement. They are open to invest. They have a geopolitical interest in coming into Latin America. Ecuador was a perfect partner.”

For any level of public trust to develop between the oil companies and the public, Swing says, levels of corporate social responsibility must be laid out and followed. And that requires transparency and public oversight.

“Usually, when an oil company starts opening a road, or starts drilling in a place that’s considered to be fragile, there’s a lot of media attention for a few weeks or a few months.

“And then it kind of fades away, and they kind of go, ‘Yeah, nobody’s looking now.’”

Delaying the inevitable

Unfortunately, as with much of Latin America, Ecuador’s history is one of boom-and-bust, resource-based industries, from the Amazon rubber boom of the 1850s to 1920s to bananas in the 1940s, to oil today. And these may be bust times now, with a future in which a global oil glut keeps prices low, with little chance of change, The Guardian reports.

“In most of the world, I think oil is very much of the mentality that grab as much as you can now,” Swing says. “Because, 10 or 20 years from now, oil is going to be obsolete.

“It already is obsolete, if we think about it in a way beyond just finance. It’s been obsolete for half a century.”

As Universidad San Francisco economics professor Diego Grijialva says: “People here joke, and they say, at some point, Ecuador will have to give up the Galapagos Islands or something like that.

"Why? Because we will not have the money to pay the Chinese.

“I say this: We might not like the U.S., but, to a great extent, they say that they embrace democracy, and they have not been too bad acting as a hegemon. With China, it’s another story. As far as being part of the Chinese empire, being subjected to their conditions, I like the U.S.A.”