FULL THRUST AHEAD

Following its departure from OPEC, Ecuador seeks to expand petroleum output by building a new refinery and attracting private investment with a wave of new oil rounds.

IN OCTOBER 2019,

Ecuadorian officials announced the nation would leave OPEC in 2020. The move signals the Andean country’s ambitions to boost oil production and attract private companies to invest in new developments under the leadership of President Lenín Moreno. To achieve such goals, officials have held several new oil rounds, leasing oil-producing territories that have brought new players such as Wayra Energy and Gran Tierra into the market. At the same time, the state-owned PetroEcuador is decommissioning the nation’s aging Esmeraldas refinery and opening an international tender for interested parties to build a modern USD6 billion facility. In total, Ecuador currently has 4.7 billion barrels in approved reserves. The nation’s former Minister of Energy and Non-Renewable Natural Resources, Carlos Pérez, said further oil exploration could lead to 8 billion oil barrels as reserves in an interview with TBY. “The country has plans to produce 700,000bpd by the end of 2021, [up] from the current average of 550,000,” Pérez said. “We need to produce now,” he continued. “According to the analyses carried out by OPEC, demand will continue to grow until 2040 and then begin to decrease, which means that crude oil prices will fall in a meaningful way subsequently. It is a race against time in terms of how fast we can produce before the price collapses.” Central to the expansion is the replacement of Ecuador’s largest refinery in Esmeraldas, which has long been plagued with production problems and structural inefficiencies. The site produces 110,000bpd but despite USD2 billion worth of renovations allocated by the previous administration, the facility’s antiquated technology does not meet modern production and environmental standards. International investors are now bidding to build a replacement that will be less polluting and more efficient and will produce petroleum fuels for local markets in line with Euro 5 emissions standards. Meanwhile, new permits have been issued for the development of key regions in the Ishpingo-Tambococha-Tiputini (ITT) oil fields in the nation’s eastern Amazon basin. Pérez said the additional eight oil platforms planned in the Yasuní National Park buffer zone are currently on hold. Ángel da Silva, CEO of Wayra Energy, said his company was among the bidders in Ecuador’s recent oil rounds, after launching a successful oil operation in Paka Norte in 2017. The company has since started developing oil fields in Oso and Yuralpa, fast expanding its presence in Ecuador’s oil sector, where it has invested a total of USD200 million to reach an expected output of 6,000bpd. In an interview with TBY, da Silva said the Moreno administration has improved the business environment in Ecuador in recent years. “Back in 2017, investment funds were quite reluctant to grant financing for projects in Ecuador,” da Silva said. “However, the new administration started to take steps to become more attractive for investment. Fortunately, today the situation is different.” No longer subject to production curbs under OPEC, officials in Ecuador are moving fast to increase output. In March 2019, a bidding round was held for foreign companies to develop oil and gas reserves, with aims to attract USD800 million in investment. Four oil fields with an estimated 36,300bpd output in the Amazon basin were leased out under 10-year contracts. Ecuador will continue to draw investments to develop a 1.6-billion-barrel oil field in the Yasuní National Park. While the majority of the nation’s oil is overseen by the state-owned PetroAmazonas, future bidding rounds will attract new private companies to join Ecuador’s group of foreign operators, including China’s Andes Petroleum, Chile’s ENAP, and Spain’s Repsol, along with other international corporations.