August 20, 2005

Ecuador strains to hike oil output, open talks

By Hugh Bronstein

QUITO, Ecuador (Reuters) - Ecuador strained to increase
petroleum production on Saturday as the government offered to
negotiate with protesters whose violent attacks shut down the
country's oil operations over the last week.

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.

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

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 talks can
begin, but Ecuadorean Interior Minister Mauricio Gandara said
he invited protest representatives to talk on Sunday in the
capital city, Quito, free of the threat of being arrested.

Petroecuador meanwhile scrambled to repair what its
spokesman called serious damage. "We still can't get into all
of the oil fields," he said.

The government says it will take until November to restore
Petroecuador's production. The company said it could take
longer to restore production in some fields.

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

President Alfredo Palacio received a telephone call from
Venezuelan President Hugo Chavez on Saturday promising the
loan, whose size is yet to be determined, said Palacio
spokesman Andres Seminario.

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.

Ecuador also plans to 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.

The protests have been the biggest challenge to Palacio
since he was appointed in April after Congress fired President
Lucio Gutierrez for meddling with 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 police and soldiers 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.