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Cablegate: Ecuador Econ Weekly: Ecuador to Pay Oxy Vat Award; Goe

VZCZCXYZ0010
RR RUEHWEB

DE RUEHQT #0259 0741810
ZNR UUUUU ZZH
R 141810Z MAR 08
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC 8626
INFO RUEHBO/AMEMBASSY BOGOTA 7442
RUEHCV/AMEMBASSY CARACAS 2949
RUEHLP/AMEMBASSY LA PAZ MAR LIMA 2485
RUEHGL/AMCONSUL GUAYAQUIL 3405
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS QUITO 000259

SIPDIS

SIPDIS

TREASURY FOR MEWENS

E.O. 12958: N/A
TAGS: ECON EPET EINV SENV EC
SUBJECT: ECUADOR ECON WEEKLY: ECUADOR TO PAY OXY VAT AWARD; GOE
SIGNS THREE MARGINAL OIL CONTRACTS; "ITT" TOUR

1. (U) The following is a weekly economic update for Ecuador that
reports notable developments that are not reported by individual
cables.

Ecuador Announces Publicly It Will Pay OXY
------------------------------------------

2. (U) On March 12 the Ecuadorian media reported that Ecuador had
lost its final appeal in an international arbitration case, which
had ruled that the GOE needs to rebate valued-added taxes paid by
Occidental Petroleum Corporation (Oxy). While the House of Lords
had rejected Ecuador's final appeal in November, this was the first
time the ruling (and the GOE's commitment to pay) has been made
public. Minister of Economy and Finances Fausto Ortiz confirmed
publicly that the GOE will pay the arbitral award, although subject
to discussions and negotiations with Oxy.

GOE Signs Three Oil Contracts
-----------------------------

3. (U) On March 12, the GOE signed oil contracts for three marginal
fields, the first petroleum concession contracts signed in nine
years. The marginal fields are small (less than 1% of total
production), contain low quality or heavy crude, and can require
expensive extraction techniques. The contracts establish that the
percentage of state participation will increase as the international
price of oil increases. The contracts are for 20 years, and
production is scheduled to start in April. Two fields will be
operated by the Amazonian Oil Partnership (Ecuadorian company Dygoil
and the Venezuelan companies Proinci, NCT Energy, NCT Estudios y
Proyectos, and Suelopetrol), with an estimated investment of $55
million. The Pegaso Oil Partnership (Colombian company Ismocol and
U.S. company Pecs Iecontsa) will operate the third field, with an
estimated $53 million investment.

4. (U) The GOE continues to negotiate new contracts with the large
foreign oil companies that have production sharing concessions,
which will be reported septel.

Former Foreign Minister Embarks on "ITT" Tour
---------------------------------------------

5. (U) Following on President Correa's extension of the deadline
for his "Keeping the Oil in the Ground" proposal (in January he
further postponed commercial development of the Ishipungo Tambococha
Tiputini -ITT field in Yasuni National Park until October, instead
of June), ex-Foreign Minister Francisco Carrion this week embarked
upon a tour to Europe this week to market the benefits of the GOE's
plan to trade debt in exchange for not drilling for oil.

JEWELL

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