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Ecuador

Last Verified on Wednesday 14th June 2017

    • Ecuador

      The law provides that the state will explore and exploit the hydrocarbons directly through the state-owned companies. Exceptionally, it may delegate the exercise of these activities to local or foreign companies with experience and technical and economic capacity. In the reality, this delegation has happened frequently. 

      Last verified on Wednesday 14th June 2017

    • Ecuador

      The oil sector is regulated by the following actors:

      • the Ministry of Hydrocarbons, in charge of formulation of the policy of the oil industry;
      • the Hydrocarbons Secretariat, responsible for implementing the activities of underwriting, administration and modification of contracts at oil and gas blocks;
      • the Agency for Regulation and Control of Hydrocarbons, responsible for regulating, controlling and monitoring the technical and operational activities in the different phases of the oil industry.

      Last verified on Wednesday 14th June 2017

    • Ecuador

      Hydrocarbons are state property, and this property continues throughout the chain of exploration, exploitation, refining, processing, storage, transportation and trading hydrocarbons.

      It is a contractual duty of the government to pay a fee per barrel (previously negotiated) to the companies dedicated to the exploration and exploitation of hydrocarbons. In some cases, this payment can be in crude oil. The only way of transfer oil from the government to a private company is as payment of services or purchase of crude oil.

      Last verified on Wednesday 14th June 2017

    • Ecuador

      The law provides various contractual forms for the exploration and exploitation of hydrocarbons, such as the participation agreement, partnership agreement, the service contract, specific services contract, among others.

      Currently, government policy is that all existing contracts before 2010 be renegotiated to apply the services contract model, in which the state pays the company a fee for each barrel extracted, and the 100 per cent of the production is government owned.

      Additionally, the state-owned company Petroamazonas is using specific services contracts with financing, to hire private companies to increase production and perform enhanced recovery in existing wells.

      Since the end of 2015, a variant has been implemented in the contract for specific services integrated with finance which included the payment by the contractor of an intangible contractual right in favor of the contracting public entreprise (Petroamazonas EP).

      Last verified on Wednesday 14th June 2017

    • Ecuador

      The acquisition of property or rights of way for the implementation of oil and gas contracts are regulated by the General Rules of Civil and Commercial Law.

      If the company requires additional land with government intervention, the company may request the Secretary of Hydrocarbons to initiate a process for obtaining a Declaration of Public Utility by the Ministry of Hydrocarbons, which subsequently will authorise the use of this land in favour of the company. All expenses and payments made for this process shall be borne by the interested contractor or the Secretariat of Hydrocarbons.

      The Declaration of Public Utility cannot be challenged through legal procedure, only the amount of the compensation can be discussed. 

      Last verified on Wednesday 14th June 2017

    • Ecuador

      The law establishes that in exploration and exploitation of hydrocarbons within six months of operations starting a minimum of 95 per cent of staff workers, 90 per cent of administrative staff and 75 per cent of technical staff, unless there are no national technicians available, must be Ecuadorean nationals. Within two years, 95 per cent of administrative personnel must be Ecuadorean.

      Also, current oil and gas contracts establish that the producers of oil have to hire national goods and services even if they cost 15 per cent more than foreign providers, if they are of the same quality.

      Last verified on Wednesday 14th June 2017

    • Ecuador

      In case of limited liability companies each partner is liable for the amount of participation within the company. In the case of consortia or other types of unincorporated joint ventures, created for the purpose of signing and execution of a contract for exploration and exploitation of hydrocarbons, each party is jointly and unlimitedly liable for the obligations acquired the company set up for that purpose.

      In any case, joint liability extends to labour, tax and social security obligations.

      Last verified on Wednesday 14th June 2017

    • Ecuador

      The transfer of a contract or the transfer to third parties of rights from a contract must be previously authorised by the Ministry. Lack of such authorisation is subject to the revocation of the contract, as provided in the law. Thus, oil and gas rights are not used as a lien for creditors.

      The payments received by the contractor may be seized as any other claim in favour of a third party that has an enforceable debt, after or during the required trial. 

      Last verified on Wednesday 14th June 2017

    • Ecuador

      There is environmental legislation specifically applicable to the exploration and exploitation of hydrocarbons. These rules and licences are controlled by the Ministry of Environment, which is responsible for checking and controlling the activities committed by the contractor, designing environmental policies and coordinating strategies, projects and programmes for the care of ecosystems, protected areas and sustainable use of natural resources.

      Last verified on Wednesday 14th June 2017

    • Ecuador

      Environmental legislation establishes a general framework for the development and approval of the activities generated in Ecuadorean territory, within the principles of sustainable development, and the standards established and ratified in the Constitution of the Republic and in international conventions such as the Declaration of Rio on Environment and Development, the Kyoto Treaty, among others.

      Last verified on Wednesday 14th June 2017

    • Ecuador

      The contracts provide that in all conflicts related to the application, interpretation, performance, breach and the effects of an early termination or any other circumstance related to the agreement, the parties shall attempt a direct settlement between them. If they fail to reach a direct agreement, either party may submit disputes to mediation.

      In case of technical or economic discrepancies foreseen in the contract, which have not been settled amicably between the parties the contractor may refer the dispute to a consultant. The consultant may not rule on the application of tax law. This is the only specific mechanism of dispute resolution for the oil and gas industry.

      The disputes that have not been resolved by these aforementioned mechanisms shall be finally settled by an ad hoc arbitration under the Arbitration Rules of the United Nations Commission on International Trade Law, UNCITRAL 1976. The arbitration shall be administered by the Permanent Court of Arbitration in The Hague in cases where the value is indeterminate or exceeds 10 million; or the Arbitration and Mediation Center of the Quito Chamber of Commerce in other cases.

      Last verified on Wednesday 14th June 2017

    • Ecuador

      The last major reform to the Hydrocarbons Law was made in 2010, which included a change in the structure of the sector with the incorporation of the Secretary of Hydrocarbons and the Agency for Regulation and Control Hydrocarbon and organisations responsible for ensuring compliance with the petroleum policies in the country. In this reform, the government mandated the application of the services contract for all oil and gas businesses in Ecuador. 

      Last verified on Wednesday 14th June 2017

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