Ecuador represented the first time in decades that Conoco had invested substantially in South America. As worldwide production volumes had shifted over the last few decades towards developing countries, Conoco sensed that its Ecuadorian project could make an important contribution to its efforts to diversify its sources of oil supply. However, they faced some problems during the development of oil reserves in Ecuador. They are discussed as follows:High Costs and High RiskThe terms of the contract in Ecuador oil drilling was that, Conoco would be putting up the initial exploration costs which would be recoverable only if oil were found. At that point, with government permission, they could go on to develop the site. PetroEcuador (the state owned oil company) would receive around 80% of the profits, and Conoco receiving the remaining 20%. Capital investments would be reimbursed before profit sharing. Exploration investment could be recovered in 5 years, and all development costs in 10 years. So it was in a sense a risky project with huge startup costs.Environmental ImpactsAs Conoco progressed with its development plans, it became increasingly aware that oil development held significant environmental implications for the rain forest. The Ecuadorian government had few measures in place to protect such vulnerable areas and attitudes towards increased protection seemed ambivalent at best.DeforestationOil development potentially posed an pressing threat to the forest in Ecuador, with one-third of the forest were cut down for further oil development in 1987, since drilling had first begun in the rain forest, it had indirectly led to deforestation. Indigenous peoples' concernsThe disturbance to local indigenous people raised another concern for environmentalists and human rights organizationsparticularly in Ecuador's Oriente. This Amazonian rain forest contained around 100,000 native Indians, many of whose livelihoods and cultures had been made very tenuous as a result of oil development. There were many conflicts with the settlers and outsiders and many of them were killed in sporadic attacks.Concerns of Yasuni National ParkIt was estimated that the park contained 400 species of flowering plants, 600 species of birds, 500 species of fish, and 120 species of mammals. Such richness led to claims that Yasuni was "the most biologically diverse rain forest on earth". It was designated a U.N. biosphere. Environmental concerns became all the more acute for Conoco when, in 1987, it belatedly discovered that Block 16 stood almost entirely within the boundaries of Yasuni National Park. The government had failed to notify the industry of this fact when it originally invited bids for Block 16 and five or six other blocks.