Ecuador goes offshore with new participation contract offerings

Nov. 20, 2002
Ecuador is offering for exploration and development four Pacific Coast blocks in the Gulf of Guayaquil region under its ninth international bidding round, government representatives said Wednesday.

Sam Fletcher
OGJ Senior Writer

HOUSTON, Nov. 20 -- Ecuador is offering for exploration and development four Pacific Coast blocks in the Gulf of Guayaquil region under its ninth international bidding round, government representatives and officials of Petroecuador, the national oil company, said Wednesday in Houston.

Two of the segments being offered, Blocks 39 and 40, are wholly offshore in 10-2,000 m of water. Another offering, Block 5, is primarily onshore in the Progreso sub-basin, with a small southwestern corner of the block extending out into the gulf. The remaining offering, Block 4, includes land on the southeastern tip of the mainland, a portion of the adjacent Puna Island, and shallow gulf waters of 10 m or less.

An additional offering of two blocks in the Oriente oil-producing region was considered but postponed until next year, officials said.

Block offering details
Block 40 includes 400,000 hectares extending south to the international boundary between Ecuador and Peru and encompassing parts of the Playas uplift and the Jambeli trough. It's also adjacent to the prolific Amistad natural gas field to the east that is operated by Noble Affiliates Inc. of Ardmore, Okla., through its EDC Ecuador Ltd. unit. Water depths in Block 40 vary 40-1,100 m, but at least half of that marine acreage is in depths less than 200 m.

Officials said two wells were drilled on that block during 1970-71, and 3,163 km of conventional 2D seismic was shot almost entirely in the eastern half of the block.

Block 39 is north of Block 40 and covers 385,000 hectares in 10-2,000 m of water. The majority of that acreage, 250,000 hectares, is in deep water. This block is adjacent to existing oil production and infrastructure, said Petroecuador officials. However, three wells drilled in this area during 1959-87 encountered no significant shows of hydrocarbons. Some 3,250 km of conventional seismic data also was acquired, primarily in 1986, but only a few, widely spaced lines extend into water deeper than 200 m, officials said.

To the east of Block 39, Block 4 contains 300,000 hectares, split between coastal grasslands and shallow waters. Three wells were drilled during 1942-70 with some hydrocarbon shows. There are 5,252 km of existing seismic data on this block, including 4,770 shot offshore primarily in 1983 and 1986.

Block 5 is immediately north of Block 4, bordering the productive Santa Elena Peninsula. There were 20 wells drilled on this block prior to 1961, based on surface geology and gravity data. The data inventory for Block 5 also includes 3,163 km of 2D seismic, of which 2,655 was shot onshore in 1981 and 1983. This area is close to existing oil infrastructure and natural gas pipelines connecting with Ecuador's largest energy market, officials said. An existing road network permits "relatively easy access" to most parts of the block, they said.

Ecuador officials plan to open a data room on the four blocks Dec. 9. Bidding will close April 25, 2003.

Contracts, work programs
The participation contracts being offered provide a 4-year exploration period for oil and a 5-year period for natural gas, with possible extensions of 2 years each. If natural gas is discovered, the participating operator and partners will be granted another 5-year period, extendable for 2 more years, in which to develop a market and construct a pipeline infrastructure for that gas.

Exploitation periods under the participation contracts are 20 years for oil and 25 years for gas, with possible extensions for both under certain conditions.

Contractors' work programs require a minimum of 500 km of seismic to be shot for each block. Winning bidders also are required to reprocess all existing conventional seismic data for their blocks. No minimum well commitments are required under the work program, however.

Bidders are required to submit environmental and safety programs as one of the first hurdles in competition for the offered blocks. They also must propose a "training fee" to be paid during the first year of production, starting at a minimum of $100,000. That will aid the government's efforts to create more jobs for inhabitants of the coastal area, officials said.

After years of political turmoil and financial fluctuations, Ecuadorian officials claim they are finally obtaining political and financial stability to encourage outside investment. They claim the blocks being offered have the potential for large finds and low costs that would result in attractive returns to investors even in periods of low oil and gas prices.

Contact Sam Fletcher at [email protected]