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Ecuador to merge state oil companies, ministries

10 Apr 2018 22:34 (+01:00 GMT)
Ecuador to merge state oil companies, ministries

Quito, 10 April (Argus) — Ecuador plans to merge its state-owned oil companies and energy and mining ministries as part of a broad four-year plan to reduce bureaucracy and cut public spending.

State-owned downstream company PetroEcuador and its upstream counterpart PetroAmazonas will become one company again, while the oil, electricity and mining ministries will be integrated into a single entity known as the energy and mining ministry. Oil minister Carlos Perez was given the new combined cabinet portfolio. He has helped to spearhead the new government´s policy shift in the oil sector, welcoming back foreign investment.

PetroAmazonas and PetroEcuador will be gradually merged starting this year in a process that will culminate by 2021, according to Edisson Garzon, chief executive of Ecuador's public companies' coordinating holding company Emco EP. PetroAmazonas was first established in 2007 as an upstream offshoot of PetroEcuador.

The number of state-owned companies coordinated by Emco EP will be reduced from 22 to 15 by merging four, including PetroAmazonas and PetroEcuador, while others such as state-owned cement company ENC will be dissolved, according to Garzon.

Ecuador's state-owned oil fleet Flota Petrolera Ecuatoriana (Flopec) and struggling airline TAME will be subject to a stabilization plan while the government seeks alternatives to help revive their balance sheets. Options include selling a minority stake to investors or pursuing strategic alliances, Garzon said.

The reorganization implies laying off some 1,000 public employees at the higher levels of the administration and reducing by 50pc the number of executive branch advisers, labor minister Raul Ledesma said.

State-owned companies' goods and services purchases will be cut by $252mn and overall spending will be slashed by 5pc.

Public-sector labor unions have been quiet so far about the sweeping plan to downsize the industry and merge the ministries. The immediate perception is that layoffs will impact upper-level officials rather than rank and file workers.