Oil Companies Give Petroecuador Thursday Deadline

Ecuador's association of oil service companies (Asemser) will give state oil company Petroecuador's production arm Petroproduccion until Thursday to pay US$65mn in overdue debts, Asemser president Fernando Pareja said, local newspaper El Universo reported. "The government and Petroecuador have to find a solution to this problem because otherwise we will be cutting off our own hand," a Petroecuador source told BNamericas. "Ecuador relies on crude exports for the majority of our income, and if production is cut it could have dire consequences for the government," the source added.

The Petroecuador source denies that the debt is a result of the mismanagement of financial resources by the country's previous administration, as some members of President Lucio Gutierrez's government have claimed.

"Unfortunately, the way Petroecuador is set up, it is not allowed to manage its own finances," the source said. The economy ministry controls Petroecuador's finances and pays the oil company a weekly amount that is supposed to cover operating and maintenance costs. However the US$7mn a week that the government currently pays the company is half of what it should be to cover its costs and pay salaries, the source said. "The economy ministry simply does not have the resources to pay the national debt and meet all its other financial obligations," the source said.

But if Petroecuador does not come up with the money by Thursday, oil service companies in Ecuador's oil producing Amazon region have threatened to halt production of crude, as they did under similar circumstances in 2000. Ten companies - including French oil services company Schlumberger - have sent letters to Petroecuador threatening to suspend services if the debts are not paid. "That would mean a sharp fall in production," the source said.

Petroecuador president Guillermo Rosero is looking at two alternatives: raiding the US$100mn oil stabilization fund, or forcing four thermo power companies to pay US$100mn in outstanding debts for diesel sales. But the thermo generators claim they cannot pay because they are not being paid by the distributors, which in turn are not being paid by their clients, the source said. In the end, "it's a complicated situation, but the government has to solve this problem, because it's a problem that is directly related to the country's lack of financial resources," the source added.

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