AMBASSADOR,S MEETING WITH PETROLEUM AND MINES

C O N F I D E N T I A L QUITO 000961

SIPDIS

TREASURY FOR MEWENS
DEPT FOR WHA/EPSC FAITH CORNEILLE

E.O. 12958: DECL: 10/04/2018
TAGS: EPET ENRG EINV ECON EC
SUBJECT: AMBASSADOR,S MEETING WITH PETROLEUM AND MINES
MINISTER CHIRIBOGA

REF: A. QUITO 681

B. QUITO 683

C. QUITO 525

D. 06 QUITO 1395

Classified By: Ambassador Heather Hodges, Reasons 1.4 (b) and (d)


1. (SBU) Summary: The Ambassador paid a courtesy call on
Minister of Petroleum and Mines Galo Chiriboga on September

18. Chiriboga emphasized ongoing cooperation between Ecuador
and the U.S. in the energy sector, and highlighted the
importance of private investment. He mentioned that the GOE
was near resolution in its investment dispute with U.S.
company Machala Power, and that he expected a new mining law
by the end of the year. End Summary.

Chiriboga Emphasizes Cooperation
--------------


2. (U) Minister Chiriboga emphasized cooperation between the
U.S. and Ecuador on energy issues. He noted that the GOE had
come to agreement with U.S. petroleum operator City Oriente
July 31 to terminate the company's contract in Ecuador (ref
A),and commented that there were no other pending government
issues with U.S. firms in the oil sector. The Ambassador
raised the Chevron lawsuit as an issue of continued high
concern to the United States. Chiriboga acknowledged the
issue, but deflected discussion, saying this was a private
sector issue. (Note: Chiriboga also overlooked two U.S.
companies - Murphy and Burlington - that have minority shares
in petroleum concessions that are being renegotiated and have
filed for international arbitration.)


3. (U) Mentioning the Refinery of the Pacific (a project the
GOE is pursuing with Venezuela's PDVSA, ref B) and the
potential for natural gas exploration in the Gulf of
Guayaquil as examples, Chiriboga noted that the country was
open to private investment in petroleum projects. He
believed services provided by private companies would be key
to completing these projects, and cited the company ARB
Ecuador (a subsidiary of U.S. construction company ARB which
is currently doing pipeline work in Ecuador) as such a
provider.

Machala Power Dispute Close to Resolution
--------------


4. (C) Chiriboga said that the GOE was close to reaching
agreement with U.S. electricity generator and natural gas
producer EDC/Machala Power, which had several disputes with
the GOE and an international arbitration case (refs C, D).
He hoped to issue a statement of agreement with Machala the
following week. (Note: Local Machala Power General Manager
John Tomich told econoff that the GOE was willing to pay
Machala's outstanding debt and sign a statement "agreeing to
resolve the remaining outstanding issues." However, he did
not think the company's Houston headquarters would agree to
drop arbitration based on such a weak commitment.)


5. (SBU) Finally, Chiriboga noted that a draft mining law
had been presented to the President for review, but did not
give details on the law. Following Ecuador's constitutional
referendum, he said, the draft law would be passed to
Ecuador's interim legislative body in hopes of approval by
the end of the year.

COMMENT:
--------------


6. (C) Chiriboga was intent on showing that the GOE is ready
to work with U.S. companies in the energy sector. Following
the meeting, Chiriboga issued a press release echoing the
same message. Some of this was sincere: the GOE worked out
its differences with City Oriente and seems to be working
hard to resolve its problems with Machala Power/EDC.
However, some of his message is a stretch: the U.S. service
company he cited is not known to any of Post's petroleum
industry contacts, and he overlooked Murphy Oil's and
Burlington's arbitrations against Ecuador.
HODGES