QUITO - In a steamy jungle of winding laurel trees and sprawling palms, a battle is raging between Ecuadorean Indians trying to protect land rights and oil companies who want to drill in the Amazon.

In the northern Amazon, Indians are suing a U.S. oil company over environmental damage they say ruined their land and made people sick. Further south, indigenous demonstrators have led violent protests to keep firms off their property.

Ecuador is one of Latin America's least stable nations and has a powerful Indian movement. But it is also one of the region's most promising nations for oil development with a government eager to tap five billion barrels in reserves.

'TEXACO NEVER AGAIN' Ecuadoriean Secoya Indian elders join hundreds of demonstrators in a march to the courthouse where a landmark trial pits indigenous rainforest peoples against ChevronTexaco, demanding the oil giant clean up the environmental contamination left behind from Texaco's oil drilling operations, in this file photo from October 21, 2003. The banner reads 'Texaco Never Again.' Ecuador's government is hoping for a second oil boom, but unless tensions with indigenous communities are eased it could be tough for the country to attract investment. REUTERS/Lou Dematteis

Analysts say it could be tough for Ecuador to attract investment unless tensions are eased with indigenous communities, who make up nearly half the people in the Amazon and are backed by a powerful national left-wing Indian movement.

Dressed in a pink robe and sashes of nutshells, Secoya Indian Elias Piayahuaje is one of 30,000 plaintiffs who accuse U.S. oil giant ChevronTexaco of destroying the jungle environment in a decade-old lawsuit that has made many of Ecuador's Indians wary of promises of "black gold."

"There's no way for the Secoya people to get their life back," said Piyahuaje, 47, leader of the 400-strong tribe. He said oily pits left by a Texaco subsidiary continue to leak a black sludge into rivers when it rains in northern Sucumbios and Orellana provinces, the heart of the country's oil industry near the Colombian border.

The lawsuit so far hasn't put off investment, analysts say, citing a new $1.4 billion pipeline built this year by private oil firms. But companies are keeping an eye on an eventual ruling that could affect the industry, they said.

Texaco, which merged with Chevron in 2001, says it followed accepted procedures during its two decades in the Amazon and paid for a $40 million clean-up that was approved by the Ecuadorean government after its contract to produce crude with state oil company Petroecuador ended in 1992.

Texaco no longer operates oil blocks in Ecuador.

SOUTHERN AMAZON

Ecuador's government is hoping for a second oil boom now that the new pipeline has been built -- which could double the nation's crude output -- to reduce the poverty blighting the lives of 60 percent of its people.

But more than 125 miles further south, Argentine oil company CGC and U.S. Burlington Resources Inc. have had government contracts to explore for crude for more than three years and neither has been able to drill a single well.

Achuar Indians have protested against oil development by kidnapping workers and holding demonstrations, saying they must protect the pristine forest where they've lived for decades. They are betting on an ecotourism project instead of oil.

"We've seen proof, we don't want what has happened in Sucumbios and Orellana to happen to us," said Achuar leader Milton Callera. "Our government can't resolve this problem."

Another group, the Quichua-speaking Sarayacu, say they oppose any oil development projects.

Burlington has admitted it can't move forward on its exploration schedule due to area protests. CGC, which won its contract in 1996, halted operations this year after workers were kidnapped by Indian protesters.

"We're sandwiched between the state and Sarayacu and we're the only ones who are losing in this whole story," said CGC's representative in Ecuador, Ricardo Nicolas.

The Energy Ministry has signed pacts to aid several indigenous communities that do support oil activity.

"When the companies begin activity again, we will take precautions and order civil authorities and police to lend their support," Energy Minister Carlos Arboleda told reporters, while accusing foreign environmental groups of rousing the Indians.

INVESTORS WARY

The government aims to attract $6.4 billion to double oil output to more than 750,000 bpd over the next eight years. Oil is already Ecuador's biggest export and accounts for 20 percent of its economy, according to the Central Bank.

But oil sector analysts say the country will have a tough time competing for investment with countries like post-war Iraq (news - web sites), despite its ample crude reserves.

"How can they go to a company asking for bids if they haven't resolved the problem of the moratorium on oil development sought by indigenous communities?" said Rene Ortiz, president of Ecuador's private oil industry association.

One reason Ecuador has been unable to convince jungle dwellers of the benefits of oil is that the cash it generates is channelled to the central government instead of the Amazon region, where 78 percent of people are poor.

Standing outside his rundown cosmetics shop, Santiago Alomoto, 25, points to the broken stone tiles lining the street in the jungle town of Lago Agrio as evidence that those who live in the crude-rich Amazon are often the last to see its benefits.

"All the oil and gold that's in the earth should be exploited," said Alomoto, who is not Indian but a long-time jungle dweller. "But the wealth should stay right here."

Copyright © 2003 Reuters Ltd

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