/* Written 3:48 PM Aug 26, 1996 by igc:newsdesk in ax:ips.english */
Copyright 1996 InterPress Service, all rights reserved. Worldwide distribution via the APC networks.

*** 23-Aug-96 ***

Maxus, a Risky Experiment by the New President?

By Mario Gonzalez

QUITO, Aug 23 (IPS) - Environmentalists and local oilworkers applauded a measure announced by the Ecuadorian government to suspend the local activities of Maxus, a transnational oil firm. But foreign investors are uneasy, and analysts were caught off guard.

There are those who interpret the suspension of activities and so-far-empty threat to militarise the company's Amazon jungle installations as an attempt by the populist government of President Abdala Bucaram, installed in office on Aug. 10, to provide a lesson to other companies and lay the groundwork for better conditions in State contracts with private oil firms.

The president of the state-owned Petroecuador, Patricio Lopez, predicted this week that the concessions granted by the State to the other 10 oil companies operating in the country will be reviewed.

Through its affiliates - Petroproduccion, Petroindustrial and Petrocomercial - Petroecuador regulates all oil activity in the country, and directly participates in the process of rating the companies seeking concessions to explore and exploit oil in the country.

Ecuador is Latin America's third exporter of oil, following Mexico and Venezuela. Experts expect the 50 percent of the budget that comes from oil activity to continue to do so for at least 15 more years.

In 1991, under the government of Rodrigo Borja (1988-92), Maxus obtained the concession for the oilfields known as Bloc 16, in the country's Amazon region, 372 kilometres southeast of Quito, under a contract for the lending of services that experts say is unfavourable for the State.

Under the Borja administration, Maxus was also awarded the concessions for the Tivacuno and Borgi-Capiron oilfields - also in the Amazon jungle.

Maxus soon became the object of harsh criticism from environmentalist organisations and indigenous communities, which demanded that the State apply stringent controls on the company's activities.

According to the group 'Accion Ecologica', Maxus has been the target of more protests by environmentalists than any other oil company in the history of the country. The group says the new government's decision puts an end to one of the nation's biggest environmental scandals.

The Ecuadorian Association of Engineers charges that the activities of Maxus ''have generated irreparable damage to the Amazon ecosystem,'' one of the world's greatest natural refuges, home to more than 60,000 species of plants and animals.

In 1995, the Argentine firm 'Yacimientos Petroliferos Fiscales' (YPF) became the main shareholder of Maxus, which is still registered in the United States.

The study ''Foreign Investment in Ecuador and Transnational Companies'' states that Maxus had made greater investments in Ecuador than any other oil company.

Alberto Acosta, a consultant with the Latin American Institute of Social Research, and the author of a study on the State's contract with Maxus, told IPS that the firm ''benefited under the Borja regime by obtaining an accord by which the profits for the country were considered a 'security margin'.''

That margin of security allowed Maxus to carry out its activities without any risk whatsoever, because the State was to compensate its losses in case the oil found was of poor quality.

Maxus was the only consortium to be granted such a contract, said Acosta. The other firms agreed to provide the State with 15 percent of their profits for every barrel extracted.

Furthermore, he added, the Tivacuno and Borgi-Capirona fields were awarded to Maxus without any public bidding process, ''contrary to any of the country's legal statutes.''

''I am not concerned about the actions that the transnational's executives may take,'' Energy Minister Alfredo Adum - who announced the decision to suspend Maxus activities and militarise its installations - said this week.

According to Adum, Maxus extracted 50 million barrels which were sold for 600 million dollars, while the receipts it handed over reported over 800 million dollars in expenses - which according to the contract the State was to cover.

''Maxus took advantage of the situation to inflate the value of its equipment and report monthly salaries of 40,000 dollars for its executives,'' said Adum.

But the contract with Maxus expired this year, which meant company executives, who have expressed their willingness to reach an agreement for participation with the State rather than for the lending of services, had expected it to be reviewed.

''The measures announced by Adum are very severe,'' said Luis Roman, a former president of Petroecuador.

Oil activity in Ecuador ''has always been very risky, and many companies,'' such as CONOCO and Texaco, ''have abandoned their attempts to exploit oil,'' he stressed.

Roman said Thursday that foreign investors are uneasy, because ''Maxus had signed a legal contract with the Borja administration - perhaps inconvenient, but legal.''

He said the step taken by the Bucaram administration ''is dangerous, and could hamper the injection of foreign capital into the country due to the climate of insecurity. If it is an experiment, I don't understand it.''

(END/IPS/trd-sp/mg/dg/sw/96)

Origin: Montevideo/OIL-ECUADOR/

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