August 20, 2005

Ecuador refuses oil protesters’ key demand

By Hugh Bronstein

QUITO, Ecuador (Reuters) - Ecuador on Saturday rejected
protesters' demands that it release dozens of people held on
suspicion of vandalizing oil fields, pushing the six-day-old
crisis into a stalemate that could jack up world petroleum

The attacks, led by activists seeking more local investment
by multinational oil companies drilling in the Amazon region,
helped raise U.S. crude oil futures by $2 to more than $65 a
barrel on Friday.

After Venezuela, Ecuador is the second largest South
American supplier of oil to the United States.

Protesters invaded oil fields in two provinces on Monday,
dynamiting pipelines, vandalizing pumping machinery and
blocking highways to demand that foreign oil companies pay for
infrastructure and provide more jobs.

The attacks will continue until the government frees at
least 80 protesters who were arrested, said Guadalupe Llori,
the elected prefect of Orellana province in eastern Ecuador.

"First this and then we will start negotiating," she told

The government said the violence must end before any talks
can begin.

"These people have attacked the property of the Ecuadorean
people," presidential spokesman Andres Seminario told Reuters.
"They need to stop before we will negotiate with them."

Meanwhile, Ecuador's oil company Petroecuador struggled to
increase production and repair damage. "There has been serious
damage and we still can't get into all of the oil fields," a
company spokesman said.


Production by the state-owned company, which suspended
exports on Thursday, totaled a rate of 33,167 barrels per day
on Saturday, compared to 201,000 bpd before protests began in
the provinces of Orellana and Sucumbios, he said.

The government says it will take until November to restore
Petroecuador's production. Oil output by private companies has
been reduced to nearly zero, Rene Ortiz, president of the
Ecuadorean Hydrocarbons Association, told Reuters.

Ecuador, with only a nine-day supply of reserves left, is
seeking a loan of oil from Venezuela to meet its export
commitments. It will also import fuel for domestic use and seek
a $400 million loan from the Latin American Reserve Fund to
avoid balance-of-payment problems from the oil stoppages.

Venezuelan Foreign Minister Ali Rodriguez said that a
meeting would be held in Caracas on Monday to study the request
and the availability of Venezuelan crude.

"Venezuela is always prepared to assist other countries of
Latin America and the Caribbean as far as it can," Rodriguez

The protests have been the biggest challenge to President
Alfredo Palacio since he was appointed in April after Congress
fired President Lucio Gutierrez for meddling in the Supreme
Court. The government has accused Gutierrez, who is in exile in
Peru, of being behind the unrest.

The protesters also want the government to renegotiate
contracts with Occidental Petroleum Corp., Petrobras and EnCana
Corp., to raise state participation.

Isolated acts of vandalism continued on Saturday, including
attacks on small pipelines. But army troops and police are
gradually restoring order since the government declared a state
of emergency in Orellana and Sucumbios on Wednesday.

Under the emergency, authorities can restrict freedom of
movement and association and censor media in the area.

On Friday, the government arrested a top protest leader,
the prefect of Sucumbios, Guillermo Munoz.