June 5th: Happy World Environment Day! As tribute to this day when environmental issues should take up at least some of our thinking time, it seems an excellent chance to bring to your attention a novel plan for the ITT oil development in Ecuador…or should that be undevelopment?
The idea is simple: the undeveloped Ishpingo-Tambococha-Tiputi (ITT) oil fields in southern Ecuador are presently under government tender from foreign oil companies. Once in operation, the project would become Ecuador’s single biggest industrial development holding reserves that are presently estimated at 920Mbbls of heavy crude. With the money to be made in the sector presently, there is plenty of interest from foreign oil concerns that include big name players such as Brazil’s Petrobras, Norway’s Statoil and China Petroleum and Chemicals Corp amongst others. Investment costs are estimated at $5Bn and those reserves should be good for 30 years production. It’s a big project by anyone’s standards.
However, Ecuador has proposed an alternative; if the world community gets together and pays Ecuador $350m per year for 30 years, then the government would leave ITT undeveloped for that time. Absurd? On the contrary; there is plenty of method behind the apparent madness.
The argument put forward by Alberto Acosta, Ecuador’s Minister of Energy and Mines, and now adopted as official government policy by President Rafael Correa is that by leaving the crude underground and untouched, planet Earth will be spared around 108 million tonnes per year of atmospheric carbon dioxide pollution as well as the $4bn it would need to clean up the site once all oil were exhausted. It would protect the Amazon basin rainforest where ITT lies, stop any localised emissions from interfering with ecosystems and weather patterns and also go a long way to help protect the local indigenous communities, particularly three tribes of local peoples that have chosen not to have any contact with the outside world if at all possible. Thus if the industrialized countries pledge to “help Ecuador carry the burden” of not developing ITT, the world would be a cleaner and greener place, deep jungle and those who live within would be protected and at the same time Ecuador’s heavy debt burden would be partially paid by the same countries holding the debt.
I personally think it is an idea of near genius, and minister Acosta (himself a very interesting character) has come up with a plan for our times. By tapping in to the growing movement to protect our planet, he has found a way to bring environmental issues to a responsible and practical conclusion. It appeals from so many angles. There’s the environmental protection at its heart, and that can only be a good thing. There’s the social good of protecting indigenous lifestyles. There’s the money that can now be diverted away from paying off sovereign debt to helping the cause of Ecuador as a country.
There’s also the humour, as the plan incites applause and grins in equal measure. Picture the scene: A press conference in the middle of virgin Ecuadorian rain forest, Acosta and Correa address the press corps holding chainsaws and with a maniacal twinkle in their eyes. Correa walks over to the nearest canopy tree and starts the motor, while Acosta moves to the microphone and snarls a line from the U2 song Vertigo; “Just gimme what I want, and no-one gets hurt.”
A fertile imagination is getting the better of me here, but the point is this; doing nothing and getting paid for it is now official Ecuadorian government policy endorsed by the President himself. Heaven on earth for Latinos, and we get to keep the trees too.
On the hard finances side, the figures just about stack up too. If the international community stump up the $350m that Ecuador is looking for, it would represent half of the projected $700m per annum revenues the State would receive from operating ITT in joint venture with a foreign oil company, assuming $32bbl average pricing over 30 years. The $350m would not go directly into the state coffers but put into a fund that would gradually pay the approximate aggregate $19Bn that Ecuador owes the Paris Club, the World Bank, the IMF and other international creditors. If all goes according to plan, the 30 years of carbon credits accrued at ITT would pay off around 58% of the country’s debt burden (ex-interests), and we assume that monies that would have been used to service that debt could then be used to stimulate and reactivate Ecuador’s internal economy.
According to the minister, the industrialized nations have 1 year in which to accept the offer or else the concession will be granted to one of the oil companies and ITT will be developed. I fervently hope that for everyone’s sake the world sees the elegance of his plan and accepts the deal. On World Environment Day, we should at least give it the attention it deserves and perhaps doff our collective hats to Señor Acosta.
Mark Turner is currently taking a siesta and billing his clients for the time asleep.