Ecuador’s state-owned EP Petroecuador announced in early May it hired Chinese state-owned Sinopec for a drilling campaign to boost oil production by 12,000 barrels per day. This move underscores Beijing’s deepening yet concerning influence in the nation’s vital energy sector.
EP Petroecuador specified the $105.5 million contract targets new well drilling and conditioning in Orellana and Sucumbíos provinces, located in the northeast Ecuadorian Amazon. Sinopec began work in late May in the oil-rich region.
Sinopec in the Ecuadorian Amazon
Sinopec, with Chinese state-owned CNPC, already holds a significant presence in the Ecuadorian Amazon through joint ventures Andes Petroleum and PetrOriental in Sucumbíos and Orellana. These operations are deeply concerning given the region’s history of severe environmental damage, including widespread crude oil contamination and abandoned pools, which seriously impact indigenous communities and fragile ecosystems, environmental news site Mongabay reported. While communities monitoring exists, experts remain concerned about the effectiveness of regulation and remediation efforts.
Oil exploitation in the Ecuadorian Amazon has caused persistent environmental damage, impacting biodiversity and local communities’ health, according to reports from organizations like the Center for Economic and Social Rights (CDES) and studies on Yasuní National Park. A prime example is the 2020 oil spill, the largest in 15 years, when pipeline ruptures due to massive river erosion contaminated the Coca and Napo rivers. Experts have linked the exacerbating erosion to the nearby Coca Codo Sinclair hydroelectric dam, which was built and financed by Chinese company Sinohydro, posing serious consequences for rivers and indigenous communities.
“China’s growing need for natural resources in Latin America in recent years, including oil, essential for its economy in the face of high consumer demand, continues unabated,” Luis Somoza, an Argentine international relations and security expert told Diálogo. Sinopec expects its July production to reach the 12,000 additional barrels target.
Debt, opacity, and strategic control
Ecuador’s average daily oil production has declined recently due to underinvestment and maintenance issues. “The daily average in 2023 was 487,280 barrels, and fell to 475,280 last year,” Argentine daily La Voz reported. This decline makes China’s role as a financier increasingly central yet also concerning due to associated transparency issues.
Oil cooperation between China and Ecuador began in 2009, when the Rafael Correa administration, facing international market exclusion due to declared illegitimate foreign debt, sought Chinese financing. Since then, Ecuador has received more than $11 billion in Chinese bank loans, largely backed by oil pre-sale contracts, The New York Times reported.
Between 2010 and 2016, four loan agreements totaling $7 billion were signed with the China Development Bank, committing crude oil deliveries to PetroChina and Unipec, the Ecuadorian Presidency reported at the time.
“Specifically, between 2005 and 2023, Beijing granted 133 loans in Latin America and the Caribbean, totaling $120 billion, generating an average value of $905 million per loan,” think tank the Andrés Bello Foundation indicated. China is now one of Ecuador’s primary financiers, with nearly a third of its loans directed to the energy sector. Ecuador’s debt to China peaked in 2016 at $9.6 billion, almost 10 percent of its gross domestic product.
In March, Ecuador awarded the Sacha block — the nation’s largest oil field — to a Sinopec-led consortium in a non-tender process aimed at increasing production and state revenues. While the award faced initial governmental demands for upfront payments, it ultimately proceeded.
Broadening regional concerns
China’s growing influence across Latin America raises concerns, as warned a June 6 report from the U.S. Council on Foreign Relations. Beijing has made significant investments in the region’s energy, infrastructure, and space sectors, also strengthening military ties with countries, like Venezuela.
In 2024, trade between China and Latin America exceeded $518 billion. In energy, China has invested more than $30 billion in oil and gas since 2005, while expanding into renewable energy and critical mineral mining such as copper and lithium.
For Somoza, China’s aggressive regional expansion has a “dark side,” with oil loans and investments often negotiated secretly between Chinese government representatives and host countries.
“Chinese state banks do not systematically publish data on their overseas loans and investments, and when they do, the information is generally not broken down,” Somoza concluded. “It is vitally important to warn that China is operating in the region with companies that are directly dependent on the Chinese Communist Party, and this is how it is seeking to gain a foothold in the American continent, where resources such as oil, copper, iron, soybeans, and lithium are essential for Beijing.”
