Ecuador's state oil company Petroleos del Ecuador continues to press expansion of its refining/marketing sector.
However, much of that expansion remains in the planning stage as big domestic fuels subsidies mask the effects of volatile oil markets (OGJ, May 27, p. 107).
At the same time, the government's efforts to attract investment by foreign oil companies in Ecuadorian exploration and development is spurring Petroecuador to expand the country's upstream infrastructure as well (OGJ, Mar. 25, p. 21).
REFINING/MARKETING
Growth in Ecuador's domestic consumption of refined products has averaged ll%/year since 1977.
Even with addition in 1977 of the 55,000 b/d Esmeraldas refinery, joining the two small refineries on the Santa Elena Peninsula, Ecuador's refined products output fell short of domestic demand. That led to an expansion of Esmeraldas refinery capacity to 95,000 b/d in the 1980s.
About the same time, growing demand for fuel in the Oriente region, spurred in part by increasing E&D activity, led to construction of the 10,000 b/d Amazonas refinery at Shushufindi.
Since its establishment in 1972, Corp. Estatal Petrolera Ecuatoriana or its successor holding company Petroecuador has had exclusive right to market refined products in the country. That eliminated a similar exclusive right Anglo-Ecuadorian Oilfields Ltd., responsible for Ecuador's first modern oil discovery in 1912, had held for many years.
Until 1981, domestic fuel prices were maintained at the same extremely low level for many years. Thereafter, prices increased once or twice a year to cover costs and prevent illegal export to neighboring countries.
During 1990, prices were increased monthly until reaching the present level-still among the lowest in the world. The price of gasoline averages about 40/gal, while other fuels are priced even lower. Surplus fuel oil is exported from Esmeraldas and La Libertad at international prices.
1990 REFINING/MARKETING RESULTS
Ecuador's total installed nameplate refining capacity in 1990 was 145,900 b/d, broken out as 90,000 b/d at Esmeraldas, 34,900 b/d at the former Anglo Santa Elena refinery, 10,000 b/d at Amazonas, 9,000 b/d at the Repetrol Santa Elena refinery, and the 1,000 b/d Lago Agrio topping plant.
The Lago-Agrio plant will be owned by the Petroecuador-Texaco Inc. joint venture until 1992, when Petroecuador will assume full ownership. Petroecuador assumed ownership of the Anglo refinery in December 1989 at no cost under a 30 year old contract. Repetrol turned over ownership of its plant in August 1990 under contractual obligations.
Total crude charge to the five refineries in 1990 was 132,359 b/d, or 91.2% of installed capacity. Product yield in 1990 averaged 115,704 b/d, an increase of 5.94% from the 1989 volume.
Petroecuador also is attempting to broaden its products slate at the Esmeraldas refinery. It recently introduced unleaded gasoline, a 92 octane grade, into the market and installed a Claus unit at the refinery that recovers 3 tons/day of sulfur.
Damage to a fluid catalytic cracking unit at the Esmeraldas refinery was repaired during a turnaround in 1990, boosting gasoline yield.
A revamp last year at the former Anglo refinery enabled Petroecuador to cut resid production while boosting diesel yield. Petroecuador claims to have cut processing costs at the Anglo plant to 40/bbl from $1.39/bbl paid the former operator in 1989.
Petroecuador is considering plans to upgrade the Anglo and Repetrol plants with installation of a catalytic cracker to treat atmospheric resid. France's Institut du Francaise des Petroles has prepared a preliminary feasibility study for the project, which Petroecuador is assessing.
Plans also call for Ecuador's refineries to eventually produce industrial asphalts and base lubes, currently imported.
CRUDE MARKETING
Crude oil is marketed by Petroecuador and each of the two original Oriente concession holders, Texaco and City Investing Co.
In 1974 CEPE started exporting its share of crude from the Oriente joint venture with Texaco and previous partner Gulf Oil Corp. In 1977 its share increased to 62.5% with acquisition of Gulf's remaining Oriente interests.
Although a member of the Organization of Petroleum Exporting Countries since 1974, Ecuador generally has followed an independent pricing policy for its crude. Instead of establishing an official crude price, all crude sales were made through bidding.
During the last 4 years, however, the price for Oriente export crude has been based on a formula pegged to the price of Alaska North Slope crude delivered on the U.S. Gulf Coast minus a freight differential from the export terminal at Balao. This formula was changed recently to also take into consideration West Texas sour in a 40-60 blend with Alaskan North Slope.
The formula currently features a slight price differential between the U.S. Gulf and West coasts. The prices Petroecuador receives serve to determine taxes for Texaco and City Investing.
During the Persian Gulf crisis, Ecuador's crude export prices jumped in line with world oil price increases, with the added income earmarked for projects within and outside Ecuador's oil sector. However, Petroecuador, Texaco, and City Investing still were required to supply crude for local refining needs at prices considerably below the export price.
On several occasions, Petroecuador has announced plans to refine its export crude in Venezuela or the U.S., but no projects have materialized.
The latest initiative now is to process Oriente crude at the two refineries in Santa Elena, expanding their combined capacity to 100,000 b/d from about 40,000 b/d in order to ship their products to the Far East. However, there is no firm plan in place.
TRANSPORTATION, GAS PROCESSING
Petroecuador continues to press expansion of the country's oil infrastructure.
Construction is under way on a 130 km, small diameter products pipeline between Santa Elena and Manta in Manabi province to serve that coastal region.
Petroecuador also is considering a second marine terminal south of Guayaquil to receive liquefied petroleum gas tankers and ease a continuing shortfall of LPG supply in the region. In addition, it plans to boost LPG production by increasing associated gas recovery from the Libertador complex to be processed at Shushufindi.
The Guayaquil area currently is served by tankers bringing products from the Santa Elena refineries. To cut costs, Petroecuador plans to lay a products pipeline from Santa Domingo along the northern coast, currently served by the Esmeraldas-Quito pipeline, to move gasoline from Esmeraldas to Guayaquil.
Completion of the pipeline will allow export of surplus products from the Santa Elena refineries.
UPSTREAM INFRASTRUCTURE
The upstream infrastructure expansion Texaco began in the Oriente basin in 1965 continues under Petroecuador.
A fairly complex infrastructure now exists in the Oriente, compared with the early days of exploration, when all equipment and personnel were airlifted in. A service road to the Oriente was extended with the initial discovery at Lago Agrio and now is partly paved and extends to every producing field in the region.
Texaco had built about 1,000 km of roads in the Oriente by December 1989 south from Lago Agrio and along the central axis of the basin down to Conanaco, the southernmost field in the joint venture area.
The roads also have served as pipeline routes, including field gathering lines tied into the Oriente trunk line.
CEPE exploration on its exclusive concession north of the joint venture spurred construction of more roads and adjoining pipelines to Libertador, Cuyabeno, Sansahuari, Tetete, Cantagallo, and Frontera fields near the border with Colombia. Pipelines move about 65,000 b/d of crude from these fields to Lago Agrio. At Lago Agrio is the terminus of the crude export line to Balao as well as products and crude storage.
South of the joint venture area, Petroecuador recently started up a pipeline from Cononaco south to Tiguino field.
Also in prospect is a pair of pipelines from Block 22 to tie into the Oriente trunk line Conoco Inc. is considering as part of Ecuador's first heavy oil development (OGJ, July 23, 1990, p. 23)
EARTHQUAKE CONCERNS
Rebuilding roads and bridges is common in the Oriente region, given the frequency of floods and earthquakes there.
The region's worst earthquake, in March 1987, severely damaged about 60 km of the trans-Ecuadorian trunk line and road from Lago Agrio to the crude export terminal at Balao on the Pacific Coast, halting oil flow for 5 months.
The damaged section was repaired with slight changes in the pipeline route, which covers a terrain 300 m above sea level at Lago Agrio to 4,000 m in the Andes Mountains to sea level at Balao.
After the March 1987 earthquake damaged Ecuador's main trunk crude pipeline, Petroecuador installed a backup line from Charapa to the Putumayo River. From there, crude was transported through Colombia's pipeline to Tumaco and then by tanker to Esmeraldas for refining.
After the earthquake, there was consideration of building a new section for the Lago Agrio-Balao trunk line, following an alternative route to avoid earthquake hazard terrain. However, no plans have materialized to date.
Officials are waiting on results of exploration by companies operating in the central and southern areas of the Oriente basin.
Thus, discoveries that feature small reserves of low gravity crude don't seem to support prospects for a new pipeline. However, exploration is continuing in those areas.
Copyright 1991 Oil & Gas Journal. All Rights Reserved.
