In October 2016, Ecuador unveiled its National Energy Agenda 2016-2040, which aimed to diversify the country’s energy matrix and ensure energy sovereignty and efficiency through renewable and sustainable sources. However, the path to achieving these goals has been fraught with challenges and the need for investor confidence. With significant oil reserves, Ecuador has the potential for a lucrative oil industry, but it has struggled to attract consistent investment due to operational issues and opacity in the sector. This article explores Ecuador’s efforts to optimize its oil industry, embrace transparency, and attract foreign investment while balancing environmental concerns.

The national oil company, Petroecuador, has experienced a high turnover of chief executives, raising doubts about the stability and long-term prospects of the oil business. The sector’s reputation for irregularity and lack of transparency has deterred investors and created a volatile operational environment. To address these issues, Ecuador’s government initiated reforms in 2012 by merging Petroecuador with the state Exploration and Production Company (E&P). In 2018, the government further consolidated the sector by integrating the mining and energy ministries into the hydrocarbons ministry, aiming to enhance transparency and rationalize administration.

Under the reform-oriented government led by President Lenín Moreno, Ecuador has taken steps to create a more transparent and investor-friendly upstream environment. The focus is on adopting a formal tender process, moving away from the involvement of state-owned oil and gas companies and less favorable service contracts. The new model emphasizes production and profit-sharing agreements, allowing for increased investment and addressing capacity gaps in refining. Producers under these agreements receive payment in oil, which can be exported or sold to Ecuador’s refineries. The contractor’s stake in gross production ranges from 40% to 87.5%, depending on the terms of the agreement.

Ecuador launched the XII Intracampos Licensing Round in September 2018, attracting investments of USD 1 billion for eight onshore blocks in the Oriente Basin. Subsequent licensing rounds, including Intracampos 2, Subandino, Suroriente, and the Litoral, are planned between the fourth quarter of 2018 and 2020. These agreements are projected to increase production by 89 million barrels of oil over the next 15 years, generating estimated revenues of USD 1.80 billion until 2032. Petroamazonas, the state-owned oil company, plans to invest in the Ishpingo-Tambococha-Tiputini (ITT) fields, particularly Block 43, with the goal of reaching a production capacity of 300,000 barrels per day by 2022. However, this development overlaps with the environmentally sensitive Yasuni National Park, posing challenges in terms of balancing economic growth with environmental preservation.

China has been a significant presence in Ecuador’s energy landscape, with oil-for-loan deals and partnerships with Chinese companies. However, loans and commitments made under the previous administration are under scrutiny, creating uncertainty among investors. Ecuador faces the challenge of attracting foreign investment while safeguarding its natural resources, particularly the Amazon rainforest. Striking a balance between economic development and environmental preservation is crucial for the country’s long-term sustainability.

Ecuador’s energy sector holds great potential, with substantial oil reserves and a government committed to investor-friendly reforms and transparency. The efforts to optimize the oil industry and attract foreign investment are essential for economic growth and energy security. However, the government must address operational challenges, build trust among investors, and navigate environmental concerns, particularly in protected areas like the Yasuni National Park. By striking the right balance, Ecuador can position itself as a sustainable and responsible player in the global energy landscape.