An Ecuadorean Environmental Ultimatum

Environmentalists in Ecuador have a difficult decision to make: pay the government roughly $350 million a year for the next two decades, or see oil companies drill in the pristine heart of Ecuador’s Amazon rainforest. President Rafael Correa, who recently delivered the audacious ultimatum, wants to harness his country’s oil wealth to develop its foundering economy.

Although it’s unclear what will eventually happen, Correa’s strategy will have a lasting impact in Latin America and the Caribbean. If the environmentalists give in and pay Ecuador, other countries could copy Ecuador’s strategy. And if the NGOs demur, countries will wonder why they should halt profitable projects when environmental groups are reluctant to sacrifice money for their principles. In effect, Correa’s proposal forces environmentalists to rethink how they operate in the region, where governments resent the presence of foreign NGOs that try to block energy projects needed to power developing economies.

The environmentalists, however, may just go for Correa’s proposal, considering that greener northern European countries have reportedly expressed an interest in paying up. They are eager to prevent the development of the oil deposit known as ITT (Ishpingo-Tambococha-Tiputini) in the lush and pristine Yasuni National Park. “In just two and a half acres, you will find nearly as many tree species as in the U.S. and Canada combined,” according to environmental group Live Yasuni.

ITT location map

But talks have been dragging for months, as potential financiers try to come up with the funds to secure a guarantee that ITT oil will remain in situ for good. That’s no easy task, given that Ecuador has been rife with political instability in years past. It’s not unheard of for the rules of the game to change in the South American country; future administrations could renege on Correa’s guarantee to leave the Yasuni alone.

The government has given environmentalists until June to make their decision. If the greens opt out, Ecuador will launch a bidding process to develop the field, which has nearly 1 billion barrels of estimated reserves – roughly a quarter of Ecuador’s total. National oil companies are lining up to develop the field; Brazil’s Petrobras reportedly has teamed up with PDVSA, Sinopec, and Chile’s Enap to bid on the project. Government officials say companies from India, Russia, Vietnam, and France have also expressed interest.

If the environmental groups pay up, look for other countries in the region to play similar games. Governments from Chile to Mexico are fighting to develop major energy projects, including numerous large-scale hydroelectric projects. Either way, life has become increasingly difficult for environmentalists in Latin America. Correa has given them two options: put up or shut up.

© 2013 Energy Tribune

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