Appointment of Ítalo Cedeño to Petroecuador’s management raises support and criticism, due to his career

Petroecuador will have its third manager in office so far in the current government (seven months) in the next few hours. He is Italo Cedeño, a long-standing oil technician well connected with private companies and who has also been in the public sector. Cedeño was appointed as the new manager in the Petroecuador Board of Directors held this week and will be sworn in after completing other rigorous procedures.

This appointment comes a few days after President Guillermo Lasso issued the Executive Decree 299, on December 22, by means of which it eliminated a provision of Decree 95 (oil policy) that determined that the process of selecting profiles for the management positions of Petroecuador it was to be carried out with a specialized and independent firm. It also occurs in the midst of a complex situation, crossed by the need to solve the problem of oil transportation, the promise of doubling production, and the need to improve the performance of the state-owned company.

The Cedeño’s appointment has generated reactions for and against, and also expectations, from various sectors.

Fernando Santos Alvite, former Minister of Energy, explained that Ítalo Cedeño is a very capable professional who, apart from having experience In Venezuela and the US in the oil area, he also worked in the governments of Oswaldo Hurtado and León Febres-Cordero. He considers that he is a correct man and that he will not let his ties with the private sector influence his actions at the head of the state company. For Santos, At this time of crisis, Cedeño is the right person for the position. He considered that it will have some resistance due to its passage through the private and public sectors.

When Santos was consulted about what would be the government’s reason for having annulled the provision of Decree 95 on a selection of managers through an independent consulting firm, he commented that it is possibly due to the issue of time. However, he assured that if Cedeño’s profile had been revised, he would surely have qualified.

Meanwhile, the president of the Oversight Commission, Assemblyman Fernando Villavicencio, showed his rejection of the appointment. He opined on his social networks that “Power groups pressure Guillermo Lasso to appoint Ítalo Cedeño as manager of EP Petroecuador.” He assured that “Cedeño was linked to the negotiation of Palo Azul (Petrobras), also managed Andes Petroleum “.

Meanwhile, Henry Llanes, an oil expert, considered Cedeño as a professional with extensive experience who will have to balance the relationship between private companies and the State. Now it should no longer serve the private companies but the State, he assures. In this he recommends that be very aware of the costs that are given in the contracts for specific works and services. Ideally, those costs shouldn’t exceed 20% of revenue, he said.

Michael Robalino, oil expert, considered that the most convenient thing for state-owned companies is to have senior executives, but free from political interference or ties to power, in order not to have a conflict of interest. In any case, he considered that the fact that Cedeño comes from the private sector is not a sin.

Urgent issues

Meanwhile, experts agree that Cedeño will have several pressing issues to resolve.

Santos said that he must first find a definitive solution to the problem of transportation of crude oil, through the pipeline. This means moving the pipeline away from the risk zone of the Coca River. Shall, in addition, introduce improved recovery techniques to increase production and thirdly, define which areas the State will keep and which will be delegated to the private sector.

Llanes He also commented that what should be done about the Crude oil transportation issue is to ensure that the route works through the right bank, as it should have been at first. He recalled that this was a discussion in 2003 when the OCP pipeline was awarded. It was indicated that the OCP should be done on the other side, so that in case of problems in one pipeline, the other would work. However, this was not taken into account.

Robalino, for his part, indicated that it is necessary to increase production, although he believed that it would hardly be possible to exceed 485,000 barrels this year. Important investments must be made to sustain production and additionally push the new intrafield oil rounds.

Constant managerial turnover

For Santos is important to change the composition of the Petroecuador board of directors, which is a dysfunctional entity, with members who can hardly dedicate time to the company. Another problem is the constant turnover of managers. “The company is adrift,” he says.

Indeed after Pablo Flores (who is involved in a bribery case), was followed by a series of managers in charge such as Ricardo Merino and Gonzalo Maldonado. In the period of President Lasso there have been the own Maldonado, Pablo Luna and now Cedeño.

In the time of President Rafael Correa there were managers such as Carlos Pareja Yannuzzelli, Alex Bravo and Marco Calvopiña. All three have faced criminal charges, related to its function.