Petroecuador resumes oil exports from SOTE system

March 29, 2004
Ecuador's state-owned oil company Petroecuador has resumed oil exports from its Trans-Ecuadorian Pipeline System (SOTE) after a warning from the 6-company consortium that controls and operates the Oleoducto de Crudos Pesados (OCP) pipeline.

By an OGJ correspondent
LOS ANGELES, Mar. 29 -- Ecuador's state-owned oil company Petroecuador has resumed oil exports from its Trans-Ecuadorian Pipeline System (SOTE) after a warning from the 6-company consortium that controls and operates the Oleoducto de Crudos Pesados (OCP) pipeline.

Petroecuador said it resumed exports Friday, as the first shipment of 720,000 b/d left the company's Balao terminal on the Pacific coast. Similar shipments are scheduled for Monday and Wednesday, the company said.

Its announcement followed a complaint issued Mar. 24 by the OCP Ecuador SA consortium.

"OCP Ecuador SA has been receiving and transporting crude oil from Petroecuador in a continuous way since. . .Mar. 18 until today," OCP said Friday, adding, "the state company has not made any exportation."

As a result, OCP Ecuador SA said it "communicated to Petroecuador Friday that in the next few hours it is going to suspend the reception of crude oil."

On Mar. 18, Petroecuador announced it had made a deal to start shipping crude oil via the OCP pipeline to avoid cutting production while repairs were being made on the state-owned SOTE line, which was damaged Mar. 11 by a landslide.

Petroecuador Pres. Pedro Espin said he expected the state firm to begin moving its 200,000 b/d in oil output with an eye toward resuming crude exports. Fausto Jara, acting vice-president of output arm Petroproduccion, said the OCP line could carry 150,000 b/d of state oil while another link could move 50,000 b/d.

But in its Mar. 24 statement, the OCP consortium said Petroecuador had not fulfilled its obligation to confirm crude oil loadings from the OCP marine terminal in Esmeraldas.

OCP said this had caused an "imminent risk" of saturation in the storage capacity of the tanks at the point of origin at Lago Agrio in the Amazon jungle as well as those of the OCP Marine Terminal.

"This circumstance could result in the paralyzation of the pipeline's operation due to the saturation of its storage capacity," OCP said.

OCP then warned Petroecuador, saying, "If they do not confirm the state crude oil [loadings] within the next hours as they committed, the reception of crude oil would be suspended until the [loadings] are duly confirmed and performed and the storage capacity allows the restart of crude oil reception from Petroecuador."

Petroecuador announced the following day that repairs had been completed on SOTE and in a statement, Espin said the pipeline, built in 1970, was pumping about 163,000 b/d, compared with its installed capacity of 400,000 b/d.

Pipeline route details
The 310 mile SOTE line carries a variety of crude gravities, reflecting the wide range of crude production from the country's fields in the Lago Agrio area of the Oriente basin in the eastern Ecuadorian Amazon rainforest region.

SOTE then extends across the Andes Mountains to Balao terminal near the port city of Esmeraldas on the Pacific Ocean.

The 450,000 b/d OCP pipeline also begins at the Oriente Basin in the eastern Ecuadorian Amazon rainforest region and for most of its length runs parallel to SOTE, except for a 100 mile stretch near Quito.

The 300 mile OCP pipeline began operating in September 2003 to transport a new heavy crude variety (18.8-19.2° gravity with 2% sulfur content) called Napo blend.

According to Calgary-based EnCana Corp., which leads the OCP consortium, the Napo blend is a heavier crude oil than the Oriente blend.

"It received a [West Texas Intermediate] differential that averaged $8.06/bbl in 2003, compared to average Oriente differential of $5.59/bbl," EnCana said in statement last month.

On Mar. 25, Espin told reporters that Petroecuador declared void a bid offering seven cargoes of 360,000 bbl of Napo crude each, and will instead offer these on a spot basis.