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Ecuador audit finds $2.5B lost in oil infrastructure corruption

By Renzo Pipoli
Ecuador audit finds $2.5B lost in oil infrastructure corruption
Ecuador's President Lenin Moreno said on Thursday that about half of $4.9 billion meant for five oil-related infrastructure projects were related to corruption. Pictured are workers preparing the inauguration of the Pacific Refinery in 2008, one of the five projects. Photo by Jose Jacome/EPA-EFE

Jan. 4 (UPI) -- Ecuadorean President Lenin Moreno said that a special audit into $4.9 billion worth of oil-related infrastructure investment in the last decade reveals that about half of it was lost to corruption.

Moreno said Thursday night in a message to the nation that an independent international audit found nearly $2.5 billion destined for works in two refineries, as well as construction of an oil terminal, one natural gas plant and one pipeline, was lost to corruption, El Comercio newspaper reported Friday.

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The investigation results come after a technical evaluation carried out by four European companies and one from the United States, tapped through bidding, with a total cost of $3.3 million, he said.

The results are "shameful and scandalous," he said.

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In the biggest case, the auditing revealed that the Esmeraldas refinery saw upgrade works worth $2.23 billion, well above an initial $754 million budget, and that despite this the original problems that motivated the work remain.

"They tripled the budget and did not fix the refinery," he said.

In a second refinery upgrade involving Refineria del Pacifico, budgets reflected 23 percent higher costs than would have been expected and there were conflicts of interest detected. In addition, most of the resources acquired with $1.5 billion destined for the project were "abandoned" after disagreements with Venezuelan state oil company PDVSA, a partner in the project.

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In the case of the pipeline Poliducto Pascuales Cuenca, the project had an initial budget of $250 million but ended up costing $623 million. Besides that, there are serious engineering problems that could involve a collapse of the tubes and gas leaks.

As for the Maritime Terminal Monteverde, Ecuadoreans ended up paying $371 million compared with an original $250 million budget. Despite this, the support columns in the ocean were not protected against corrosion. Ecuador has recently had to spend an additional $210 million to fix that.

Finally, there was also $36 million in overruns related to construction of a natural gas plant in Bajo Alto, where $76 million was invested in infrastructure that operated at only 50 percent capacity.

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"Besides this, the plant is sinking so it will need to be paralyzed 150 days" and eventually demolished and rebuilt.

"Those five cases I am presenting need to be investigated (by State prosecutors)," Moreno said.

El Telegrafo newspaper, which covered the same information, said that during Moreno's government there have been about 317 former officials found suspected of corruption. The former officials were part of former Ecuadorean President Rafael Correa administration.

Correa was president of Ecuador between 2007 and 2017. He has lived in Belgium since 2017, and has in the past said that he is innocent of any charges and that there is a political persecution against him in Ecuador.

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According to the Ecuadorean media group Plan V, Ecuador also lost large sums of money through direct oil sales,, which started soon after Correa won elections to become president in 2006, based on the idea that intermediates needed to be eliminated.

Plan V said that between 2009 and 2016 Correa's administration obtained credit for up to $18 billion, mainly with China, and with interest rates of about 7 percent, tied to the supply of crude oil and fuel oil until 2024 and to be used mostly in Chinese-built infrastructure.

On grounds of being "a strategic alliance" with the Asian nation, the project awards went without bidding and supervision.

One emblematic case of the Chinese-related infrastructure projects that cost Ecuador billions, and done during Correa's government, is the Coca Codo Sinclair dam project.

A December 24 report by The New York Times pointed out that poor work resulted in multiple cracks and fast sediment accumulation, but also that the huge dam in an area of high volcanic activity threatens the population and has affected the environment.

China is getting about 80 percent of Ecuador's oil to cover the $19 billion infrastructure spending involving Chinese work in several projects, the report said.

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