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For Ecuador, quest for oil brings conflict

COCA, Ecuador - Open oil pits black as moon craters pock the Oriente, Ecuador's northern Amazon basin.
/ Source: Daily

COCA, Ecuador - Open oil pits black as moon craters pock the Oriente, Ecuador's northern Amazon basin. Men stand on the rims of trenches left behind by spent oil wells, breaking up sludge with hydraulic jets and pumping out a toxic brackish stew.

Not far from the pits is the Amazonian village of San Carlos. Stomach, bowel and skin cancers devastate local subsistence farm families. They blame a cancer rate four times the national average on oil wells polluting local rivers and ground water.

"People come and say they want to help but we are still here and no help comes," said a villager at a community meeting of about 150 people in a small semi-outdoor gym.

Such are the people and the environmental wounds of Ecuador's oil industry, an industry whose petrodollars changed a banana republic into the third-largest exporter of oil in Latin America.

Only now is it paying the price for years of letting the industry run amuck.

Taking sides

With billions of barrels of oil still under one of the world's most spectacular rainforests, the Amazonian basin continues to be a battleground for indigenous Indians, environmentalists, international oil conglomerates and, recently, striking oil workers.

Impoverished oil workers want a bigger local cut of the oil revenues, much of which now goes to feed Ecuador's national debt.

"Even the poor people are up in arms about the places they live," said Ken Stern, managing director of New York-based FTI Consulting, an energy consulting firm. "You would think with all the oil and the employment, they would see improved infrastructure ... But there is no trickle down."

And indigenous Indians are split between those who want more oil money and those who want to keep the Amazon insulated from a global oil vortex.

"The world is changing a lot but we want to preserve this spot in the Amazon," said Mario Santi, a 30-year-old leader in the Quichua tribe, opposing all exploration and a supporter of traditional hunting and fishing tribal existence.

Outside the Amazon, the conflict plays out against the backdrop of a fossil-fuel based global economy approaching a tipping point.

"If we are interested in reducing the influence of the Middle East and countries like Russia and Venezuela, then we have to look other places . . . like Ecuador," said David Goldwyn, co-editor of the 2005 book "Energy and Security: Towards A New Foreign Policy Strategy."

Price of peak oil

Increasingly, oil analysts worry about peak oil, a time in the not-so-distant future when more than half of the world's oil is depleted and the half remaining will be difficult to recover. The nightmare scenario casts the emerging economies of India and China as voracious oil consumers as supplies draw down.

And the perception that the world oil supply chain is volatile already pumps up oil prices beyond what many analysts think principles of demand and supply dictate.

Oil companies racked-up record 2005 profits, such as Exxon Mobil Corp.'s $36 billion on worldwide sales of $371 billion. Comparatively, Ecuador's gross domestic product last year was only $31 billion even though it sits on the continent's second largest proven reserves.

Supply chain concerns focus on the countries with the most oil, which also tend to be political hot spots.

Iraq, Nigeria, Myanmar, Saudi Arabia and Venezuela each struggle with terrorists, rebels or domestic upheaval.

This month, the government of Ecuador declared a state of emergency in the Oriente, as thousands striking oil workers closed pipelines with sporadic acts of violence, which have included kidnappings, shootings and bombings.

Consequently, the Ecuadorian government is once again teetering under the weight of oil protests, Andean Free Trade protests and rival political factions. The country has had three presidents in nine years. Ex-president Lucio Gutierrez, deposed last April, was released from prison this month and says he is seeking re-election in October.

Ecuador's oil rush

Ecuador's oil story begins in the 1960s when Texaco found oil and signed an agreement with the government-owned oil firm PetroEcuador. Texaco, which merged with Chevron in 2001, became a minority partner from 1964 to 1992.

Gushing oil wells flowing through ribbons of pipelines across pristine Amazon rainforest created something akin to the California Gold Rush.

The government encouraged settlers to flock to the jungle with the promise of free land and work in the oil industry. Hundreds of thousands moved in, building roads and towns, pushing back the jungle.

However, environmentalists and other groups claim a side effect was 18 billion gallons of pollutants pumped into local rivers and oil remediation pits.

The groups have been suing Chevron for more than a decade - both in the United States and Ecuador - to clean-up the mess.

The legal challenge has become a landmark case because it marks one of first times an American oil company is being sued in a foreign country.

Late last year, scientists, activists, lawyers and a judge tramped through an open field testing the ground for oil contamination that may have been left by Texaco. The case is expected to last several more years.

However, Chevron vehemently denies the charges. It paid a multimillion-dollar remediation fee in the 1990s and a government inspection cleared it of further responsibility, the firm points out.

The Amazon's pollution, the firm maintains, is due to a lack of sanitation and oil spills after it left in 1992.

"In the intervening 15 years, PetroEcuador's safety record has been abhorrent," said Jeff Moore, a Chevron spokesman. "We know we did the right thing in Ecuador. It's not fair to blame all this on Texaco."

In the meantime, as Ecuador wrestles with its oil past, it remains conflicted about the future of the Amazon and its free-flowing oil dollars.

Los Angeles-based Occidental Oil and Gas Corp. is the largest foreign investor in the country, but Ecuador's attorney general supports revoking its contract due to alleged violations. In all, 16 multinational oil firms work in the country, including U.S.-based Kerr-McGee and Burlington.

However, due to concessions negotiated with striking oil workers, some legislators are calling for additional taxes on foreign companies.

As a result, new foreign exploration contracts have dried up and the cash-strapped PetroEcuador is pumping much less than its capacity.

For the U.S., Ecuador is just the 11th-largest supplier, although about 50 percent of its oil exports go to California.

However, Stern maintains that microcosms of oil strife such as Ecuador don't bode well for global oil as production nears peak levels.

Beauty and the beast

Beyond concerns for the global oil market, environmentalists ask about the damage to the global environment.

Some of the world's most environmentally pristine lands are also some of the most desirable drilling points.

The Niger Delta, Alaska's Arctic National Wildlife Refuge and the South America's Amazon basin each have substantial untapped reserves.

In Ecuador, because the northern Amazon basin developed first, the oil pits and rundown oil boom towns stand as warnings to the southern Amazon.

In a land where spirits of the land and spiritual healers known as "shamans" rule, world oil faces primordial opposition. Some indigenous people believe the fight over oil will bring down the outside, modern world.

"For us, life does not exist in the north," said Ilda Santi, a Quichua leader from an southern Amazonian tribal village east of the city of Puyo. "We have knowledge of the spirits who live inside mother earth and those spirits would never recover."

• Daily Herald Business Writer Mike Comerford went to Ecuador in November to study the impact of oil on the Amazon. He also wrote last year's series on suburban Chicago ties to the Philippines.