Ecuador's energy minister, Eduardo Lopez, may soon unveil a proposal to reform state-run Petroecuador as the company seeks to attract more private-sector investment.
Lopez's mentioned the proposal as Ecuador's energy and mines ministry called on 18 prequalified companies to bid for service contracts on four oil and gas fields operated by Petroecuador in the country's Amazon area.
Production in Shushufindi, Lago Agrio, Culebra-Yulebra, and Auca fields, currently operated by Petroecuador, has declined in recent years due to lack of investment. The government wants to attract foreign capital to boost production.
Production target
Investments are estimated at $397 million. The idea is to increase production by 23,885 b/d to 103,474 b/d, Petroecuador said in a statement. Ecuador's need for private investment to increase oil production is evident to others as well.
According to the US Energy Information Administration, "While private companies have increased their production in recent years, state-owned oil company Petroecuador, traditionally the largest producer of crude oil in Ecuador, has seen its output decline."
In 1999, Petroecuador and private companies produced 256,200 b/d and 117,000 b/d of crude oil, respectively. In 2002, Petroecuador's crude oil production slipped to 222,100 b/d, while private companies' output climbed to 171,000 b/d. Petroecuador's crude oil production fell further in 2003, to an estimated 204,000 b/d, according to preliminary reports.
"If this trend continues," EIA said, "2004 may mark the first time production from private companies exceeds that of the state company."
Lopez told reporters the main goal of the reform proposal, which he expects to present to President Lucio Gutierrez within 60 days, is to ensure that Petroecuador operates under the same conditions as private-sector companies.
"Under the current conditions, it's very difficult to attract the interest of private companies to participate in various bidding rounds, as they have to compete at a disadvantage against Petroecuador, which enjoys many privileges as a state-run company," the minister said. Ecuador has yet to announce oil production figures for 2004, but one US company has, and they show a remarkable upsurge.
Occidental Petroleum Corp. during the week of Jan. 24 announced an 84% increase its oil production to 46,000 b/d in Ecuador, where the company has an exploration and production contract for Block 15, with partner EnCana Corp.
Government threat
Ironically, Ecuador's government has threatened to kill Oxy's Block 15 contract, saying the California-based company sold a 40% stake in the block to EnCana without the government's permission.
Occidental says it is hopeful the dispute will be resolved. The company's Western Hemisphere Pres. John Morgan said in a conference call last week that the situation has not affected production.
Morgan's attitude represents exactly the sort of robust enterprise Ecuador need—and will get—if private-sector companies are allowed to do their work. With a little luck, Lopez's proposed reforms might just help them do that.
