Ecuador to launch oil block auction amid protests

Wed Nov 28, 2012 5:17pm EST

* Government expects at least $1 billion in investments

* Indigenous people say jungle at risk, oppose exploration

By Eduardo Garcia

QUITO, Nov 28 (Reuters) - Ecuador will launch a licensing round on Wednesday for 13 oil blocks in unspoiled Amazon areas despite opposition from indigenous groups that fear damage to their ancestral lands.

Ecuador, OPEC's smallest member, is upbeat that it will attract investments worth at least $1 billion in oil exploration projects for the 13 blocks, as well as three more that have been assigned to state-run oil company Petroamazonas.

Ecuador's oil output has been stagnant at around 500,000 barrels per day (bpd) since 2010 when the government asked oil investors to sign less-profitable service contracts or leave the country. Since then, oil firms have not invested in exploration.

"The time frame of our oil reserves is limited. If we take our reserves nowadays and divide them by our output they will last for about 10 years," Oil Minister Wilson Pastor told a conference on Tuesday.

He said Ecuador's goal is to find enough reserves in its southeastern regions so that it can continue extracting oil at the current rate for a further 10 years.

According to the government, preliminary studies show there are between 400 million and 1.6 billion barrels of crude oil reserves in that region, but Pastor said those estimates were well below the area's real potential.

The auction is scheduled to start on Wednesday evening. Companies will have six months to present their bids, and contracts should be signed before the end of September 2013.

Six indigenous groups live in the area and have vowed to oppose oil exploration because they fear investors will spoil their homeland.

"Oil has been extracted for 40 years and that has only led to poverty, environmental devastation, diseases and genocide," indigenous leader Humberto Cholango said in a statement.

"The indigenous movement will defend their territory."

About 200 Indians protested outside the luxury Quito hotel while Pastor gave his speech inside about the licensing round. Some of them wore feathered head-pieces and held spears, and they shouted slogans against oil companies through loudspeakers.

The blocks are near the border with Peru, far from the northern Amazon regions where most of Ecuador's crude is extracted. The region has huge environmental diversity and borders the Yasuni national park, which boasts one of the richest ranges of wildlife on the planet.

Academic Carlos Larrea, who has carried out a study of the possible impact of oil investments in the area, said there is a high risk that oil companies will spoil pristine jungle, while the chances of finding large deposits are low.

"Peru has built an oil pipeline that is operating well below its capacity. That means the amount of oil they found was less than they had hoped for," he told reporters last week.

Pastor said on Wednesday that the pipeline on the Peruvian side of the border can transport 200,000 bpd, but is currently pumping about 30,000 bpd.

Ecuador has signed a deal that would let oil companies transport crude from the area through the Peruvian pipeline.

The deal could make the bidding round more attractive to foreign investors because it implies they would be able to send their crude to Peru's Pacific coast for export. (Additional reporting by Jose Llangari; Editing by Daniel Wallis and Jim Marshall)

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