The main sticking point is that Petroecuador says it is only able to cut US$89mn from its budget without seriously affecting its production goals. Petroecuador has proposed a budget of about US$1.7bn, but the economy minister, Mauricio Pozo, is insisting that the company cut US$135mn from that figure. Most of the budget cuts will affect Petroecuador's production arm Petroproduccion, which has agreed to postpone to 2004 its plans to buy four drilling rigs at a cost of US$53mn. The board wants to cut another US$36mn by lowering salaries and other operating costs.
Meanwhile, Petroecuador VP Victor Hugo Jijon wants to meet with President Lucio Gutierrez to explain the consequences of new guidelines recently approved by the board concerning state and private investment in Ecuador's oil industry over the long term. According to Jijon, a group of politicians is "colluding to keep [President Gutierrez] misinformed," meaning there is a risk that Gutierrez will make an incorrect decision regarding the state-oil company, he said, local newspaper El Comercio reported.
In an April 9 meeting, the board approved energy minister Carlos Arboleda's plan that all of Petroecuador's contracts with private companies should be managed in the form of association contracts. Jijon disagrees that association contracts with private companies are the best form of state participation in Ecuador's oil sector, and he wants to explain to Gutierrez that there are alternative contract options. Association contracts would encourage foreign investment and benefit the state through royalty payments, but leave Petroecuador out of the process of awarding the individual contracts, Jijon says. Energy minister Arboleda is also revising about 50 contracts signed under the previous administration, which he says gave too much participation to foreign companies, while short changing the state.
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