Neil Pyper: A messy affair – and it's hard to see it ending cleanly

Wednesday 16 February 2011 01:00
Comments

Texaco, which Chevron acquired in 2001, is accused of responsibility for water and soil contamination between 1964 and 1992. In truth the $8.6bn fine is unlikely to be enforceable.

The company left Ecuador in 1992 and no longer has assets in the country that could be seized. It argues that the ruling is fraudulent and lacking in scientific evidence, and in any case it fulfilled its cleaning-up responsibilities.

In a wider sense much has changed in Ecuador. The government of President Rafael Correa has promoted an agenda of economic nationalism. Ecuador's National Assembly last year passed a hydrocarbons law requiring that contracts give the state ownership of the means of production, with companies simply receiving payment for their extraction work.

At the same time the government is aware of environmental sensitivities surrounding oil extraction. Correa has pioneered an innovative project under which Ecuador agrees not to exploit oil and gas fields in return for foreign governments agreeing to contribute to a fund administered by the UN Development Programme.

But change has come slowly. Texaco worked in alliance with the state oil company Petroecuador, which continues to operate along the Colombian border. Part of Chevron's case included a claim that Petroecuador should pay damages. Petroecuador's performance has improved in recent years but the company has long been plagued by corruption, managerial incompetence and political interference.

Oil is a key source of government revenue, and the country needs to develop production. It cannot afford to turn the tap off. In truth, Correa is keen to convince oil companies that new contracts offer a secure and stable framework in which to operate.

This combination of policy volatility, dependence on oil revenues, and continuing difficulties at Petroecuador mean there is a significant risk of further environmental damage in Ecuador.

Neil Pyper is a senior analyst at Oxford Analytica

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Please enter a valid email
Please enter a valid email
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Please enter your first name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
Please enter your last name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
You must be over 18 years old to register
You must be over 18 years old to register
Opt-out-policy
You can opt-out at any time by signing in to your account to manage your preferences. Each email has a link to unsubscribe.

By clicking ‘Create my account’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in