QUITO -- The Ecuadorian government has decided to suspend oil production by Italy's Agip and France's Perenco, both of which operate in the Amazon region, to comply with new OPEC cuts.
The two firms produce a combined 31,000 barrels per day of crude, which is less than the 44,000 bpd cut for Ecuador mandated by OPEC, of which Ecuador is a member. The Mines and Petroleum Ministry of Ecuador is to take until next week to determine what further cuts will be made to comply with OPEC's decision.
A Ministry spokesman told Efe Thursday that the government decided to suspend output by Agip, which produces some 24,000 bpd of Ecuadorian crude, and Perenco, which pumps some 7,000 bpd.
OPEC on Dec. 17 agreed to cut joint production by 2.2. million barrels in an attempt to stabilize international crude prices, which have plunged more than 70 percent from record highs last summer.
Mines and Petroleum Minister Derlis Palacios told a television station Monday that, due to the sharp price drop, it is more costly for the country to develop several oil fields than it is to suspend production on them.
Neither of the companies has yet released a statement on the move by Ecuador, where other foreign companies such as Spain's Repsol YPF, Brazil's Petrobras and China's Andes Petroleum also operate.
On Dec. 27, Ecuadorian President Rafael Correa said his government would order a reduction in output by foreign companies to comply with the production cuts agreed to by OPEC. Correa said then that those reductions would not only involve state-owned Petroecuador but also private companies.
"It's not that Petroecuador has to reduce (production), but also the private companies, where we're even losing" money, Correa said, after noting that the government's contract with Agip - a unit of Italian energy group Eni - has resulted in losses for Ecuador.
"With that contract we're losing money, we're paying more than what we're receiving," Correa said, adding that he had already ordered "all of Agip's production" to be suspended.
Oil is Ecuador's main export, and the Andean nation currently produces around 500,000 barrels per day of crude, of which state-owned Petroecuador accounts for just under 40 percent.
Revenue from oil exports finances roughly 35 percent of Ecuador's public spending.