Page 4 - LatAmOil Week 05 2021

LatAmOil COMMENTARY LatAmOil

Ecuador’s financing conundrum

Three Western banks have opted to quit financing Ecuadorean oil exports,
and their decision may set a troubling precedent that benefits China most

WHEN Ecuador decided to leave OPEC in late the fastest path towards higher revenues in 2021.
2019, it did so because it wanted the freedom to This path is hardly free of hazards, though.
WHAT: set its own oil production targets. Its govern- Ecuador is now facing a new roadblock in the
ING, Credit Suisse and ment did not want to be bound by the group’s form of several major foreign banks’ recent
BNP Paribas have quota system, as it had decided to try increas- announcements about their willingness (or lack
announced plans to stop ing output in order to generate more income to of) to finance transactions involving the pro-
supporting Ecuadorean cover budget expenses and pay off debts. duction and sale of Ecuadorean crude.
oil export deals. Unfortunately, however, its plans to raise
yields above the 500,000-550,000 barrel per day Cutting off funds
WHY: (bpd) mark soon ran up against major obsta- This new obstacle emerged in late January, when
The decision follows the cles – namely, declines in world energy demand CNP Paribas (France), Credit Suisse (Switzer-
publication of a report
from groups concerned and oil prices. Even worse, these developments land) and ING (Netherlands) declared their
with environmental and stemmed from the coronavirus (COVID-19) intent to exit or scale back involvement in Ecua-
indigenous rights issues. pandemic, which hit the country very hard. dor’s oil sector.
Under these circumstances, it was hardly a More specifically, ING said that it would sus-
WHAT NEXT: surprise when Ecuadorean Energy Minister pend “new contracts for the financing of oil and
Without access to West- Rene Ortiz said last November that he expected gas trade flows from the Ecuadorean Amazon,”
ern capital markets, oil the country’s oil output to average 480,000 bpd pending further review. Similarly, Credit Suisse
producers may have few in 2020, well below the 2019 figure of 531,000 announced that it would not continue to finance
options beyond Chinese bpd. Nevertheless, officials in Quito remained additional oil exports from the Amazon areas of
loans. determined to push production levels back up, Ecuador or Peru after it met its commitments
on the grounds that increased crude sales offer under existing contracts.

P4 www. NEWSBASE .com Week 05 04•February•2021