Extractive Industries

Yasuní: a silent investment

Chinese oil drilling to begin as Ecuador blames international community for failed initiative

Drilling for over 846 million barrels of oil in the Yasuní National Park, located in the Ecuadorian Amazon, is set to begin in next year despite numerous challenges and opposition from activists, indigenous peoples and the scientific community. Ecuador is one of the smallest countries in Latin America by land area yet according to the Yasunidos collective, one hectare of tropical forest in Yasuní is home to more species than the United States and Canada combined. “For me, Yasuní is an international laboratory for the globalization and internationalization of natural resources. It’s emblematic of what’s happening and is the only place in the world with a UNESCO biosphere reserve and indigenous communities first contacted just over 50 years ago,” explains Massimo De Marchi, a geographer from the University of Padova and a member of the Geoyasuní research group. Although energy companies have been operating in the national park since the 1970s, the remotest parts are still untouched. However, all this is set to change with extraction of the first barrel of oil in 2016. The oil fields contain around 20% of Ecuador’s fossil fuel reserves, with 40% of the country’s economy based on the non-renewable resource. The controversy focuses on a specific area of the national park, known as the ITT Block (Ishpingo–Tambococha–Tiputini). The conflict is all the more acute because of the presence of international interests, debts with Beijing and the large amounts of investment from Chinese companies. They are so much a part of everyday life that Chinese is now spoken in some parts of the Ecuadorean Amazon. A study by Geoyasuní identifies six blocks for oil exploration which overlap with the protected area in the Yasuní National Park, established in 1979. Among them are blocks 14 and 16, both of which are the focus of Chinese interests. Block 14 is operated by PetroOriental, which is owned by two Chinese state companies: China National Petroleum Corporation (CNPC) which owns 55%, and China Petrochemical Corporation (Sinopec) which owns 45%. Block 16, otherwise known as the Repsol block, has changed ownership in recent years.  Stakeholders currently include Repsol YPF Ecuador S.A., with 35%, the Taiwanese state-owned Overseas Petroleum and Investment Corporation (OPIC), with 31%, Tiptop Energy Ltd (Sinopec), with 20% and the state corporation of the People’s Republic of China (CRS Sinochem) with 14% “China’s presence in the Amazonian blocks can take a number of forms, such as direct ownership, as is the case with Block 14, which is operated by PetroOriental, or, in the case of Block 16, through the acquisition of an existing company by Taiwan and China. Chinese capital is present in Yasuní in various forms,” explains De Marchi. Quito has moved closer to Beijing following the election of Rafael Correa as president in 2007. The year after he was elected, Correa declared a partial default on the country’s external debt. China was one of the main creditors and oil extracted from Yasuní will be used to pay off the debt agreement signed with Beijing. In June 2013, Correa, having recently begun his third term, announced the investment of US$ 12.5 billion in the modernization and construction of new refineries in Ecuador by the state-owned China National Petroleum Company. According to the local press, Ecuador’s debt to China is now over US$ 7bn, or 10% of the country’s GDP, and it has been using oil to repay Chinese loans since 2009. De Marchi recalls the launch of the Yasuní–ITT initiative by Correa at the UN General Assembly in 2007. The initiative promised to leave the blocks untouched on the condition that Ecuador could raise half the expected profits from drilling for oil (US$ 3.6 billion). The international community pledged around US$ 330 million, although as little as US$ 13 million had been deposited when Correa scrapped the initiative in August 2013. Lorena Tapia, the Environment Minister of Ecuador told Diálogo Chino that the initiative was renewed on various occasions “in the hope of a response from the international community.” “This was an Ecuadorean scheme with two options,” she explains. “Leave the resources in the ground without extraction, on the condition of receiving at least half the resources we expected to receive if they had been exploited. And the option to extract them if we weren’t able to raise these funds. Unfortunately the scheme was unsuccessful. We didn’t manage to raise the resources we had hoped for.” This June, the Ecuadorean government and the National Assembly approved drilling for oil after attempts by activists from the Yasunidos collective to hold a referendum calling for a proper consultation with the affected communities. The movement collected 800,000 signatures, however almost half of these were declared invalid by National Electoral Council, which rejected the referendum. According to De Marchi, who is highly critical of the government’s position, while there was an international discourse “aimed at appeasing the environmentalists, the reality was that technical processes were already underway to exploit the ITT reserves.” Yasuní has been regarded as Ecuador’s oil frontier since the 1990s. “It’s a coveted strategic resource,” notes De Marchi. “At international level, the government has not worked to raise funds and promote the initiative. I believe it wants the campaign to fail so it can justify drilling for oil. They’ve hardly done anything. An international fund-raising campaign needs to be well organized.” Furthermore, De Marchi claims that official documents show that environmental impact assessments were already underway in government institutions prior to the scrapping of the initiative by President Rafael Correa: “the analysis of environmental impact studies began in 2010.” According to Juan Carlos Jintiach, a spokesman for the Coordinator of Indigenous Organizations in the Amazon Basin (COICA), it will not be long before disaster strikes in the Ecuadorean Amazon. “I don’t know of a single instance in which drilling for oil has not resulted in pollution, environmental damage and illness,” he told Diálogo Chino. “It will be a complete [disaster]. I’m also concerned about the isolated indigenous communities who are cut off from the outside world. There are four of them in this area and they are under increasing pressure,” he said. Jintiach, a member of the Shuar indigenous community, maintains the need for greater “clarity” in conversations about protecting indigenous rights. “This is a protected area and as such should be reserved for this purpose.” He adds. “What we are saying is that we want to leave the oil in the ground. We are not Chinese or North American. We are indigenous peoples and our decision must be respected. Something is missing from the equation.”

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