Ecuador Congress Seeks Changes to Oilfield Trust Fund

QUITO Aug 31, 2006 (Dow Jones Newswires)

The Ecuadorean Congress' Economic Commission will formally suggest on Tuesday changes to the Finance Ministry's urgent proposal to create a trust fund for revenues from oilfields formerly operated by U.S.-based Occidental Petroleum Co (OXY).

September 8 is the deadline for Congress to approve, reform or reject the proposal for Feiseh, as the trust fund is known by its Spanish acronym. If the proposal gains congressional approval, the first project to receive financing from Feiseh will be the modernization of the Esmeraldas refinery, which will require between $130 million and $150 million. The government is also seeking to invest about $1.5 billion in hydroelectric projects that generate at least 25 megawatts.

Marco Morillo, a legislator on the Economic Commission, told Dow Jones Newswires Thursday that the group's formal report will recommend two basic changes. The first is the construction of new refineries instead of updating existing ones. The second is the financing of hydroelectric projects of at least 10 megawatts, as well as alternative-energy projects such as wind and solar power. Legislators are also proposing to put $65 million in an environmental fund to finance the preservation of protected areas and river basins.

In addition, the commission believes the revenues from the former Occidental fields shouldn't be managed by the Solidarity Fund, the government entity that administrates state-owned firms, Morillo said.

The lawmakers have no objection to the government's plan to earmark 27% of Feiseh funds for Cereps, a program that finances social projects. Feiseh money will also go toward operating the three former Occidental fields: Block 15, Eden-Yuturi and Limoncocha. The state revoked Occidental's contract in mid-May and took over the fields, saying the company violated terms of its contract.

According to the Economy Ministry's latest calculations, the three oilfields will generate $620 million in additional revenue for the state through the end of the year. The International Monetary Fund has a higher estimate of $650 million.

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