Ecuador: New Oil Pipeline Threatens Fragile Ecosystems and Communities from Amazon Rainforest to Pacific Coast

January 2003

Project Profile: The OCP Pipeline

Ignoring the devastating toll thirty years of reckless oil development has taken on the country - particularly on the Amazon and its people- a consortium of multinational oil companies are driving ahead with a controversial new oil pipeline project known as the OCP (Oleoducto de Crudos Pesados). Due for completion in June 2003, the pipeline will transport heavy crude from the country's Amazon rainforest region to the Pacific Coast, placing fragile ecosystems and dozens of communities along the 300-mile route in jeopardy.

The damaging impacts of the new pipeline will be felt far beyond the immediate pipeline route. To fill the OCP, Ecuador must double current oil production by embarking on an unprecedented wave of new oil exploitation in vast areas of Amazon frontier forest. There are plans for hundreds of new oil wells and associated processing plants, roads and pipelines that will litter the country's last remaining old growth rainforests and territories of isolated indigenous peoples.

Prominent Ecuadorian and international environmental and indigenous rights organizations denounce the pipeline as the first stage of a wider war that the oil industry will wage on isolated indigenous peoples in the Amazon forest frontiers of Ecuador.

Who is Behind the OCP?

The IMF: The International Monetary Fund’s endorsement of oil and gas expansion as a means of servicing external debt has pushed the Ecuadorian government to try to meet payments on its huge US$16 billion debt through a massive oil development program in the Amazon. With future credit agreements for Ecuador under doubt, the IMF is insisting that 80% of government takings from increased oil output stemming from the OCP be directed towards debt repayment.

Big Oil: The OCP Consortium includes EnCana (Canada, 31.4%), Repsol-YPF (Spain, 25.6%), Pecom Energia (Argentina, 15%), Occidental Petroleum (U.S., 12.2%), ENI-AGIP (Italy, 7.5%), Techint (Argentina, 4.1%), and Perenco (UK, 4.0%). Techint – a company with an appalling environmental track record - is building the pipeline with a carelessness that even resulted in a temporarily suspension of the project’s environmental license by the Ecuadorian government.

Financiers: The German bank Westdeutsche Landesbank (WestLB) is in the process of distributing a $900 million syndicated loan to finance the OCP. Germany’s leading environmental organizations have attacked WestLB, which is 42% controlled by the German federal state of North Rhine Westphalia (NWR). The Italian Green Party has denounced the involvement of the Italian Banca Nazionale del Lavoro in the loan.

Government: During 30 years of oil dependency, poverty has increased in Ecuador. Yet, the recently ousted conservative government broadcast the myth of the OCP as an economic panacea for the nation and met OCP opponents with increasingly draconian repression. With the collusion of the OCP Consortium, the security forces meted out bullets, tear gas and beatings to peaceful demonstrators resulting in deaths, injuries and many arrests.

U.S. Markets: Ecuador's oil exports are primarily destined for consumption in the United States, particularly California. U.S. reliance on oil - the main fossil fuel responsible for climate change – is accelerating the destruction of the Amazon heartlands.

Protected Areas Threatened by Ecological Disasters
The pipeline route chosen by the OCP Consortium traverses seven national parks and protected areas, including a World Bank Global Environment Facility biodiversity reserve. Pipeline critics argue that the inevitable ruptures in the OCP will cause ecological disaster by spilling more oil into forest ecosystems than the existing SOTE oil pipeline, which has been ripped apart countless times by landslides, earthquakes, volcanic eruptions and insurgent bombings.

The OCP cuts through the middle of the Mindo Nambillo Cloudforest Reserve and the surrounding ecologically sensitive forests. This area is home to more than 450 species of birds---46 of which are threatened by extinction --and has been designated the first "Important Bird Area" of South America. The pipeline is a direct threat to the area's burgeoning eco-tourism industry, which had been expected to bring in $600 million to local communities over the next 20 years.

The OCP Consortium cares little about these globally renowned ecosystems - it has flouted its environmental agreements with the Ecuadorian government again and again. An October 2002 report by a former World Bank specialist provided conclusive evidence that the project repeatedly violates even minimal World Bank environmental standards. The OCP’s full long-term impacts on ecologically and culturally sensitive areas have never been fully assessed or disclosed due to major flaws in the pipeline Environmental Impact Assessment (EIA).

Oil Corporations Ransack Indigenous Territories
The desire to fill the OCP is already fueling the search for new oil reserves in the ancestral territories of Achuar, Shuar, Huaorani, Quichua, Shiwiar and Zapara indigenous communities in the pristine forests of Ecuador’s southern Amazon region.

Many of these communities have vowed to never permit oil development on their land, as for them resistance to oil is literally a matter of life and death. They point to the environmental, social, and economic ruin affecting indigenous peoples in major oil producing regions in the northern Ecuadorian Amazon, where toxic contamination by oil companies has caused some of the highest rates of cancer in the country. Basic services and infrastructure are lacking and malnutrition, prostitution, violent crime rates are among the highest in the nation.

A dramatic increase in oil production will also affect the communities who live alongside the country's principle oil refineries in the coastal province of Esmeraldas. These communities, the majority of which are Afro-Ecuadorian, have some of the highest rates of cancers, respiratory, skin, and stomach ailments in all of Ecuador as a result of constant air, water, and soil contamination from the adjacent refineries.

OCP Encounters Wide-Ranging Opposition
The pipeline, shelved for over ten years due to opposition, has been riddled with problems since construction began in 2001. Communities across Ecuador have launched innovative actions to halt the OCP. In January 2002, residents of the Mindo Cloudforest staged a peaceful tree-sit on a remote ridge top to prevent pipeline construction through the area. After two-months, the Mindo campaigners were brutally evicted from their tree-sit. In November 2002 they reoccupied the site - now their own recently purchased private property - only to again be evicted and arrested by security forces.

In the Amazon provinces of Orellana and Sucumbios, residents protested the pipeline through general strikes and numerous direct action initiatives to blockade project machinery. Local farmers also denounced grave damages to their crops, grazing lands, and water supplies on over one hundred small farms. In Lago Agrio, the starting point of the pipeline, a key area of contention is the Amazon Refinery Station, to be built on the edge of town.

Internationally, more than forty environmental and social justice groups have held a wave of protests at German financier WestLB’s offices throughout the world in solidarity with Ecuadorian pipeline opponents.

Public outrage prompted German parliamentarians to criticize the OCP loan because the pipeline violates the minimal World Bank environmental standards. WestLB has publicly stated that compliance with World Bank environmental guidelines is an ‘indispensable condition for any financial engagement’ with OCP.”

Wide-ranging opposition has taken a heavy toll on the OCP project. In August 2002 controversy forced former OCP President Hernan Lara to resign, while industry estimates show that delays from environmental and social controversies have already put the OCP nearly $200 million over budget. In October 2002, one of the two financial rating agencies for the project, Moody’s, downgraded the OCP’s investment rating to borderline junk status (Baa3) citing, inter alia, growing environmental, political and economic risks.

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