Ecuador’s Ministry of Mines and Oil has withdrawn 1,664 mining concessions and returned them to state control.
Meanwhile recent changes in windfall profits tax rates has made doing business so unprofitable in Ecuador, a Brazilian oil company has decided to turn one of its Ecuadorian oil concessions over to that country’s government.
Business News Americas reported Monday that Ecuador’s mining ministry said further withdrawals could be forthcoming. Among the properties returned to the state were 85 concessions held by former officials and their relative who worked at the former ministries of natural resources and energy and mines.
Ecuador‘s new sustainable mining policy is scheduled to be adopted by the Constituent Assembly after a referendum election scheduled for this month determines if the country will have a new constitution. The new draft mining law will be submitted to the new legislative body in October 2008
In April Ecuador froze all mining exploration in the country and revoked hundreds of concessions, claiming they were illegally granted without the consent of local communities.
In Monday’s edition of the Ecuador Mining News, journalist Silvia Santacruz urged the Government of Ecuador to not apply a windfall profits tax to mining. “EMN hopes the Ecuadorian government will come to its senses and understand that foreign investors’ biggest energy is uncertainty. And the industry has had a handful with the infamous April 18 mining mandate, which continues halting large-scale mining operations until mid-October. Not to mention that the industry faces reforms to its attractive mining law such as stricter environmental controls and higher royalties than the maximum 5% previously announced.”
Among the companies which have already returned their properties because of the windfall profits tax is Brazil’s state oil firm Petrobras. In his weekly address President Correa declared, “After hard negotiations with Petrobras and although it has $200 million in investment, we got the company to transfer the block 31 to Ecuador. It is in Petroecuador’s hands.”
Block 31 has 200,000 hectares, including some in the Yasuni National Park, which the United Nations has declared a world biosphere reserve. Production has not started in Block 31 although Petrobas had planned to start producing 30,000 barrels a day from the Apaika and Nenke fields.
However, Petrobras still intends to negotiate for its contract in block 18, which produces about 32,000 barrels per day, 51% of which is turned over to Ecuador.