‘This is something that divides us’: Ecuador’s turbulent transition from oil dependence

Jul 10, 2024 | 0 comments

By Kimberely Brown

In a small corner of Ecuador’s Yasuní national park is the village of Llanchama. This Indigenous Quichua community is carved out of the dense Amazonian rainforest along the Tiputini River. But for nearly 10 years an entirely different development has been attempting to establish itself on the village’s borders: the Ishpingo-Tambococha-Tiputini oilfield.

Holmer Machoa Grefa, in the stern of his boat, with his wife, Ursula, and a neighbour from Llanchama on the Tiputini River, the only way in and out of the village.

Holmer Machoa Grefa grew up in Llanchama, and since 2013 has been fighting to get the oil industry out of his territory. Last August, he and his family were overjoyed when Ecuadorians voted to halt oil extraction in a historic referendum.

“When I found out about the results, for me, it was a joy that this was achieved after 10 years,” says Machoa.

But he and his family celebrated quietly. Not everyone in the community was happy. Many remember the $3,000 (£2,300) each person received when the oil company arrived in 2013, and the promise of jobs they still hope will come. Many voted for extraction to continue.

“This is something that divides us here more than anything, the issue of economics,” says Machoa.

Many in Ecuador are hopeful that the results of the Yasuní referendum last year, in which 59% of the population voted against oil, will mark the beginning of the end for Ecuador’s extraction economy. But many continue to see oil as a solution to the country’s economic crisis.

Oil revenue has been the backbone of Ecuador’s economy since it began exporting crude in the 1970s. Oil now accounts for nearly one-third of the country’s GDP. Since Ecuador is burdened with large debt and a fiscal deficit of more than $5bn, policymakers are reluctant to shift away from the traditional oil economy.

During last year’s election campaign, Daniel Noboa, now the president, promised to vote against extraction in the Yasuní referendum. However, like his predecessors, Noboa announced plans to increase oil production when he took office in November. The goal is to increase output by 20% above the roughly 500,000 barrels a day that Ecuador produces.

With this decision, Ecuador has joined other Latin American and Caribbean countries towards increasing oil and gas production.

Then in January, as his government struggled to fund its clampdown on criminal gangs, Noboa proposed a moratorium on the result of the referendum.

At a press conference in February, the then minister of energy and mines, Andrea Arrobo Peña, said the loss from ceasing production in ITT, plus the cost of dismantling the infrastructure (which should be completed within a year of the referendum), would cause “a worse economic crisis than the one we are living in”.

For now it appears the results of the referendum stand and extraction will be halted. Noboa has pursued other ways to finance the hike in security spending. These include raising VAT, cutting fuel subsidies – which caused uprisings across the country when suggested by past presidents in 2019 and 2021 – and taking out another $1bn IMF loan.

In May, Noboa ordered the formation of a special committee to create a plan to dismantle ITT. It is unclear, however, whether this council will meet the August deadline to present the plan and begin the actual demolition. Any decision is particularly delicate in light of the presidential election coming early next year.

While the country voted to keep oil underground, two provinces voted for extraction to continue: Orellana and Sucumbíos, the two northern Amazon provinces where most of Ecuador’s oil production is located, including ITT. The results highlight the extent to which local economies rely on the oil industry.

Edgar Noteno, a Quichua man from the community of Playas Cuyabeno in a reserve north of Yasuní, voted to continue oil extraction in the ITT. Though Noteno works in ecotourism, friends and family members from nearby communities work on the rigs or provide the oil workers with food and lodging along the river. They are now concerned for their future, he says.

“They did a super horrible referendum, which we disagree with. The majority of people here will be left unemployed,” Noteno says.

Today, he says, “people have a different vision”, including going to university, having a steady job and income, and providing better for their families.

While some Indigenous communities rejected Noboa’s request for a moratorium on the Yasuní referendum, saying it would put democracy at risk, others have expressed their disapproval of the national results. In February, one Waorani Indigenous group living in Yasuní said they were looking at legal options to stop the closure.

Seen from the air, the Ishpingo oil platform, part of the ITT project, deep in Yasuní National Park.

It is not only jobs that the oil industry provides for communities. In many cases, oil companies build schools or health and community centres and pay for teachers and health workers, which are technically the responsibility of the state, says Ramiro Páez Rivera, an executive with Petrolia Ecuador, a company operating in several other blocks in Yasuní.

“The government has forgotten about these people,” says Páez Rivera. “And it is the oil and service companies that take on this responsibility.”

But such infrastructure and services don’t always translate into increased wellbeing for communities near extraction activities, says Carlos Larrea Maldonado, a professor at Simón Bolívar Andean University in Quito.

One study in the 2021 Amazon assessment report shows that communities in Ecuador’s Amazon who live close to extraction projects have had fewer years of schooling and worse health conditions than those who live further away. There are more skin disorders, but also malnutrition and cancer due to living with water and air contamination.

“It is not a curse, but the result of bad policies,” says Larrea Maldonado, one of the report’s authors. Government corruption and mismanagement of funds are largely to blame, he adds.

Noboa has not released details of his plans, yet his government has reiterated the importance of increasing oil production to address the country’s economic needs. Neither the Ministry of Energy and Mines nor the state oil company Petroecuador responded to requests for comment.

Páez Rivera says the oil industry could solve Ecuador’s economic crisis if the government goes ahead with previous expansion plans that were never properly carried out. This includes reactivating some of the 2,000 oil wells in the northern Amazon that have closed but may still have reserves, or starting from scratch in the more remote south-east oil blocks on the other side of Yasuní, he says.

The south-east option, however, would involve significant investment in new pipelines and other infrastructure, which already exist in the northern wells, he adds.

Petroecuador workers operating an oil well in the Ishpingo field in Yasuní National Park.

Páez Rivera doubts Noboa’s efforts to close ITT will make much progress. “The country does not have sufficient economic resources [to dismantle the installations], and it would be a great loss for the country to stop oil production from ITT,” he says.

Ecuador’s oil industry says it is not to blame for the destruction of the Amazon, not since newer technologies and stricter environmental protocols came about in the 1990s. ITT’s 12 platforms benefit from this technology. More efficient drilling has meant minimal deforestation, and they no longer burn excess fossil gas consistently through gas flaring, which emits significant amounts of methane, says Páez Rivera.

“There is an impact, but the environmental impact is minimal,” says Páez Rivera, adding that older platforms in the north of the country continue to use gas flares and other older technologies. “ITT is where the least pollution occurs.”

However, there are other risks, such as oil spills, which could be catastrophic if they happen near water sources where they are harder to contain. In the case of the ITT project, Larrea Maldonado says the worst damage comes from the construction of an oil road in the middle of the jungle, opening up the Amazon to hunters, illegal loggers or the expansion of deforestation for agriculture.

It also lies only a few hundred metres from the home territory of Ecuador’s last two Indigenous communities in voluntary isolation, the Tagaeri and Taromenane.

Outside the ITT project, oil drilling continues in other areas of Yasuní and in various nature reserves in the Amazon. Earlier this year, as part of a strategy to renegotiate contracts for seven oil projects to help expand production, Ecuador’s government approved a new contract to continue drilling in block 62, which lies in the Cuyabeno wildlife reserve north of Yasuní.

Economist Alberto Acosta, who has been pushing for a post-extractive economy in Ecuador for decades, is still hopeful that it can happen. This would include helping communities in the Amazon create alternative jobs and economies, looking at carbon markets, more debt-for-nature swaps and increasing taxes on the wealthy to make up for lost oil income. And, of course, prohibiting the drilling of new oil wells, especially in national parks.

“It’s part of the tragedy that they do not stop in the national parks, neither in Yasuní nor in Cuyabeno,” Acosta says. “We have to stop seeing the Amazon as a territory of sacrifice.”

Credit: The Guardian


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