Ecuador's oil crisis: declining production and rising debt

By the end of 2024, oil revenues will reach just over $1.3 billion, a sharp drop from $3.3 billion in 2014. This decline reflects a 2.5 times decrease in the sector’s contribution to public finances over the last decade, excluding brief periods of high prices like in 2022.

Production has also fallen, from 556,000 to 470,000 barrels per day, with each unproduced barrel representing lost revenue for public investments, forcing the state to rely more on debt. Taxes now provide the majority of government income, but they aren't enough to meet the country's needs.

As oil revenues shrink, Ecuador’s public debt has surged. The government increasingly relies on external borrowing to fund essential services and infrastructure, deepening the financial strain. This growing dependence on debt limits the country’s ability to invest in critical sectors, creating a vicious cycle of borrowing to cover gaps left by dwindling oil revenues.

Fernando Benalcázar, former Vice Minister of Mines, says Ecuador is facing its worst oil crisis in 50 years. Frequent leadership changes at Petroecuador, the state oil company, have led to inefficiencies, causing drops in production. For example, after Petroecuador took over Block 16, production fell from 15,000 to 10,000 barrels per day, costing the state millions.

The government has a plan to attract $10.5 billion in private investment, but Benalcázar emphasizes that the process must avoid past mistakes, like missed deadlines and ineffective bidding processes. Additionally, Ecuador’s closure of the ITT oil fields will cost over $1.5 billion and take up to 11 years for environmental recovery.

Source: La Hora.