The project most critical to Ecuadors petroleum future has stumbled badly.
The government has called off a tender to expand Ecuadors main crude oil trunk pipeline. The line, which extends from Lago Agrio oil field to the export terminal at Balao, was to be expanded to throughput capacity of 450,000 b/d from the current 300,000 b/d.
The $600 million project was to be carried out under a build-operate-transfer (BOT) arrangement with foreign companies.
Stalled plans for some major oil development projects in Ecuador may be further stymied for lack of pipeline export capacity (OGJ, May 29, p.22).
In addition, Quitos efforts to stimulate exploration in Ecuador have stalled. Negotiations on three contracts arising from the countrys seventh bidding round, held 18 months ago, have been delayed indefinitely for what were only described as economic reasons. Separately, Ecuador has postponed its eighth exploration acreage bidding round for lack of interest among oil and gas companies. It had been scheduled for early 1996.
Pipeline project
The trunk line expansion fell victim to a flurry of criticism from several quarters. It was to have been operated for 12 years under the BOT scheme by foreign companies, namely companies operating oil fields under service contracts with state owned petroleum company Petroleos del Ecuador (Petroecuador).
Critics attacked almost every aspect of the project including its cost, operation by foreign companies, loss of income to current pipeline operator Petroecuador, and high tariff levels set for shippersincluding main producer Petroecuador.
The main service contractors operating fields in the countryOryx Energy Co., ARCO, Elf Aquitaine, and Maxus-YPFreacted immediately to the tender withdrawal. They offered to carry out an expansion of the line under dramatically revised conditions.
Meanwhile, while the service contractors develop a formal proposal, Petroecuador has disclosed its interest in conducting an expansion of the trunk line. The state company proposes operating the pipeline alone, charging tariffs on the basis of new investments required, and expanding capacity to 400,000 b/d with new pump stations and no additional looping. This revised proposal is estimated to cost $120 million.
Although no decision has been taken regarding the competing proposals, it would appear Petroecuador has the edge.
That can be attributed not only to the economics of the revised project but also to the countrys current political atmosphere, which is characterized by widespread opposition to government projects. Petroecuadors experience in operating the pipeline combined with its drastically scaled back proposal may help the state company prevail in its efforts to carry out the project alone.
One sign of this likelihood is another change at the Energy Ministry. Galo Abril, who supported the original project, recently resigned as Energy Minister. His replacement has voiced a preference for a revised project.
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