Ecuador pres­i­dent says coun­try now pro­duc­ing oil at a loss


Ecuadore­ans are al­ready con­tend­ing with a rum­bling, ash-spew­ing vol­cano and ris­ing liv­ing costs be­cause they use the ap­pre­ci­at­ing U.S. dol­lar as their cur­rency.

Now they’ve been told that Ecuador’s oil — its prin­ci­pal ex­port and a vi­tal source of gov­ern­ment fund­ing — costs more to pro­duce than it earns.

Pres­i­dent Rafael Cor­rea ex­plained on Tues­day, dur­ing a visit to ar­eas threat­ened by the Co­topaxi vol­cano, that it costs the OPEC na­tion US$39 to pro­duce a bar­rel of oil for which it only re­ceives US$30.

If crude prices re­main be­low US$40 that could mean more bud­get cuts or higher taxes.

Ecuador pro­duces 538,000 bar­rels a day and un­der cur­rent cir­cum­stances stands to lose up to US$3 mil­lion a day on them, though the state-owned Petroe­cuador oil com­pany says it was prof­itable for the first half of 2015 be­cause oil av­er­aged US$47 a bar­rel.

The coun­try also has fixed-price con­tracts — the most sig­nif­i­cant with Petrochina from 2009 and Thai­land this year that rep­re­sent about US$7 bil­lion in sales.

Oil sales con­trib­ute 13 per­cent to the na­tional bud­get, or about US$3.1 bil­lion.

Tum­bling oil prices this year have al­ready prompted Cor­rea to cut spend­ing by US$2.2 bil­lion, Fi­nance Min­is­ter Fausto Her­rera said last week.

The gov­ern­ment hasn’t yet spec­i­fied what pro­grams will be cut. How­ever, Cor­rea did say that “for ex­am­ple some of the sub­stan­tial im­prove­ments in ed­u­ca­tion would be de­layed.”

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