NEW HYDROCARBON LAW SCHEDULED IN ECUADOR

Ecuadorean energy officials expect the national congress to approve a new hydrocarbon law by the end of July. The new law, coupled with revised foreign investment rules issued last January, will set the stage for a sweeping reorganization of Ecuador's oil and gas industry. It will include privatization of nearly all state petroleum companies. State oil and gas company Petroleos del Ecuador is to be recast as a regulatory agency.

June 21, 1993

4 min read

Ecuadorean energy officials expect the national congress to approve a new hydrocarbon law by the end of July.

The new law, coupled with revised foreign investment rules issued last January, will set the stage for a sweeping reorganization of Ecuador's oil and gas industry. It will include privatization of nearly all state petroleum companies.

State oil and gas company Petroleos del Ecuador is to be recast as a regulatory agency.

The reorganization, under a master plan developed by ICF Resources Inc., Fairfax Va., for Ecuador's Master Oil Plan Technical Commission, is considered necessary to attract investment needed to develop the country's oil and gas exploration, production, transportation, and refining sectors.

Passage of the new hydrocarbon law is to be followed in the first week of September by release of documents for Ecuador's seventh competitive bidding round.

Hans W. Collin, executive president of Petroecuador, said companies participating in the tender will be allowed 6-8 months for internal analyses of data. About 20 new blocks are to be offered in the tender. More than 40 companies by mid-June had expressed interest in bidding.

MASTER PLAN EFFECTS

Ivan Nieto, president of the master oil plan commission, said ICF's study found that more than $4 billion must be invested during 1994-2005 in Ecuador's oil and gas industry to achieve goals identified. But if the goals are met, Ecuador is expected to earn more than $3 billion in added income during the two decades following start up of the plan than would be possible under previous development plans.

Pablo Baquerizo, Ecuador's minister of energy and mines, said the new hydrocarbon law, although still subject to changes, is expected to allow open, competitive markets in all sectors of the economy and liberal rules for exporting or importing hydrocarbons and petroleum products.

Baquerizo said changes will soon be announced to risk contracts. Association, concession, and service contracts all are to be allowed. Private companies already operating in Ecuador may ask to change their contracts, but current agreements will not be changed unless contractors so request.

Achieving optimal investment in the petroleum sector could allow Ecuador to increase oil production to 650,000 b/d by 1997 from about 370,000 b/d at present. Under the current plan, oil production will peak in 1997 at about 469,000 b/d (OGJ, Mar. 1, p. 56).

Most of the increased oil flow will stem from infill drilling and water flooding in Sacha, Shushufindi, and other large fields. The master plan calls for development spending of more than $2.5 billion during 1994-2005.

OTHER DETAILS

Spending of $971 millon in 1994-99 will allow expansion of Ecuador's oil pipeline system to ship more Oriente crude to Esmeraldas for export. Also heavy crude oils will be blended with Oriente oil to meet,minimum viscosity requirements for pumping.

Outlays of $473 million in 1994-2005 will allow Ecuador to upgrade and expand refining capacity. Included in the master strategy are plans to add a coker, fluid catalytic cracker, and other process units at the Esmeraldas refinery so crude oil can be exported instead of No. 6 fuel oil. Ecuador will increase refining capacity as domestic demand increases.

Drilling outlays under the master oil plan are to increase by $450 million compared with current plans. Under the revised plan, about $496 million will be earmarked for infill drilling in existing fields and $159 million in new fields, $423 million for exploratory drilling, and $229 million for drilling wells in waterfloods.

Projected gains to net cash flow if the master plan is fully implemented are $1.8 billion in 1993, $3.2 billion in 1999, $2.9 billion in 2005, and $1.5 billion in 2012.

Collin, Nieto, Baquerizo, and other officials disclosed Ecuador's plans at a Houston meeting sponsored by the U.S. Trade and Development Agency and the InterAmerican Chamber of Commerce.