Ecuador sees 8% crude output rebound; eyes $14 bln in investment
Ecuador expects crude production to rise 8% by the end of the year to around 530,000 barrels per day (bpd), Energy Minister Juan Carlos Bermeo said in an interview, an increase that could help the cash-strapped Andean nation recover from a recession.
In the long-term, the country is seeking to double output to around 1 million bpd, which would require about $14 billion in investment, Bermeo told Reuters on Wednesday. The minister is a civil engineer who was named to the post in June by recently-elected conservative President Guillermo Lasso.
Such growth would have a transformative impact on the South American country’s economy, but could face several roadblocks, from limited pipeline capacity to opposition from local communities. Lasso’s predecessor, Lenin Moreno, struggled to spur growth through free-market reforms and a $6.5 billion deal with the International Monetary Fund (IMF).
“The country’s best economic and social plan is oil production,” Bermeo said.
Bermeo said that given the world’s ongoing transition away from fossil fuels to combat climate change, Ecuador was running out of time to develop its considerable crude reserves to spur economic growth.
“We must take advantage of our circumstances and our resources now, not tomorrow, because tomorrow could be too late,” he said.
To help double output, Lasso has pledged to launch new risk-sharing contracts in an attempt to attract more private investment to the oil sector, which grant more autonomy and financial upside than Ecuador’s current joint services agreements.
Currently, private companies produce around 100,000 bpd, with state-owned Petroecuador producing around 390,000 bpd. Bermeo said he expected some companies already in the country to migrate to the new contracts.
He said that for other companies that do not want to migrate to the new contracts, the government would propose improvements to their services agreements to incentivize the companies to remain in the country, given that many of them are approaching the end of their contracts.
Bermeo said the government would present a model contract for the new types of deals within two weeks. The government would then launch an international bidding round under those new terms for Intracampos II, a series of oilfields in northeastern Ecuador.
In addition to the development of fields, the $14 billion required includes investment in midstream assets such as pipelines, pumping stations and storage tanks, Bermeo said, adding that the country needed to launch new exploration campaigns to discover new reserves.
“We need to create infrastructure to accompany that oil production,” he said. “It must go in parallel, so that the oil has a route to leave the well.”
For this year’s production increase, Bermeo said he expected private companies would boost output through low-hanging fruit such as improvements to upgrading and water injection. Petroecuador is also working on a drilling campaign at its Sacha field and infrastructure improvements at its ITT field, he said.
Bermeo added that in October, Ecuador would re-launch a tender to find a private operator for Petroecuador’s 110,000 bpd Esmeraldas refinery. Bids would be due in December, and the government hopes to have a candidate to operate the plant in 2022, Bermeo said.
Source: Reuters (Reporting by Alexandra Valencia Writing by Luc Cohen Editing by Frances Kerry)