The oil sector is key for Ecuador, especially since it continues to be an important source of income. However, in 2022 it was going through several problems due to the drop in oil production, an indigenous strike, electrical failures, among others. The lack of completion of projects and the constant change of authorities have also characterized this year. Minister Fernando Santos, who knows the sector in depth, came to occupy the portfolio at the end of October and has had to deal with a series of obstacles: among them a complaint about an alleged participation in a company offshore and a threat of an arbitration claim by Petrolia, which he believes will not prosper. However, he assures that on December 31 at 24:00 blocks 16 and 67 will pass into state hands.
What is your evaluation on the oil issue of Ecuador and worldwide in 2022?
In Ecuador, in terms of production, it has unfortunately been a year of stagnation. The production of 2022 really started in March, because in December and the first months of the year we had problems due to the rupture of the oil pipelines. In March, production was 495,000 barrels, and we are going to close December with 489,000, that is, 6,000 barrels below. In June production fell to 409,000 barrels due to the problems of indigenous unemployment. It has not been a good year in terms of production. However, for next year we hope to increase production a little more and reach 521,000 barrels per day. Those extra barrels will come from the Ishpingo; In addition, environmental licenses are already being processed through the Ministry of the Environment.
In terms of prices, was it a good year?
Prices have been good, we will be at an annual average of $85 a barrel, although with a downward trend in recent months. WTI is currently at $75, ours is at $68. Next year it would stay at these prices. It is that the market is tending to stabilize, even with a downward trend. Currently there is a fear of a major global economic recession for 2023 and that leads to a decrease in consumption and a stable supply. The differential between the price of WTI and Ecuadorian crude has not been very pronounced. It is that the US refineries mix heavy crude with light crude and at the moment heavy crude is not arriving from Venezuela due to the restrictions that the US has. In this sense, there is an appetite for our crude. By 2023, more heavy crude could enter from Venezuela and this could be leading to a wider spread. I see the price of Ecuadorian crude at $65 in 2023. It was not correct to raise the price as requested in the Assembly, it is not healthy to put an illusory figure. We have to be realists.
What was the main problem and why has production not been able to pick up?
Petroecuador manages mature fields in which production naturally declines and secondary and tertiary recovery techniques are needed. What the state company currently does is drill wells, but that does not give good results because they run out quickly and are quickly closed. As an example, the state company drilled 523 wells and closed 517 wells. And the end result is that production did not increase but rather declined. For this reason, new recovery technologies must be introduced, inviting private companies that own them.
In which fields can production be increased?
They are thinking of putting Sacha out to tender so that companies can come that, investing and using modern technology, can increase production. The ITT is not being well managed, since the traditional methods are not giving results. ITT production, which at the beginning of the year was at 55,000 barrels, including the production of Tambococha and Tiputini, did not increase, rather it has fallen despite the entry of Ishpingo. With the authorization of more wells that has been given from the Ministry of the Environment, I believe that production will be able to increase somewhat, perhaps around 35,000 barrels. In addition, the companies that participated in the first intracampus round are already entering production. Frontera is with 2,184 barrels, Geopark with 370 barrels and Gran Terra with 3,630 barrels. It’s not much, but some progress has been made.
How much did the country lose with the last blackout of 728 wells due to an electrical failure?
It is estimated that it was $4.9 million. But it is not a loss because it is recovered, it is a deferral of income. That is to say, a day is not produced, but the crude oil is not lost.
But it is undeniable that the oil electrical system is wrong. What can be done, what is the solution route for this luck of time bomb?
Petroecuador consumes a large amount of energy, but since the beginning of production in the 1970s, electricity generation was negligible. There was no interconnected system and diesel generation began in each field. Over time, the country became more sophisticated and increased its electricity generation, but it has not reached the Amazon. We have been with the same system for 50 years: old plants burning hundreds of thousands of gallons of diesel per day. The solution is to interconnect the national system and bring electricity from Paute and Coca to the Amazon oil sector. But it must be recognized that the interests of the companies that produce energy with diesel have been so powerful that this tender to interconnect the Amazon with the national system has failed five times. Today it is bidding again. There is a substation that is ready to operate in the Amazon, but Petroecuador has not made a 7 km line and it is already energized. The moral is that there are interests of these companies that generate electricity with diesel to continue. In addition, since 2016 there is no maintenance. There are as a consequence the blackouts. But the interconnection to the national system with the northeast tender is expected for the middle or third quarter of 2023.
But in three quarters the same thing can happen to us, new lightning strikes and blackouts.
Unfortunately yes. I am honest with you, it is a heavy inheritance that is received, a politicized company. If there was a business concept, it would worry about maintenance. There has been a lot of routine, little innovation and little interest in the company. It is a sick company I would say. It is the largest in the country and has neither accounting nor auditing.
Why did the audit process called for Petroecuador fail?
The four big auditing firms that were asked to participate refused for image reasons. Deep down they think the company doesn’t have all the backing and they don’t want to be associated with a failed audit. However, the audit process will be resumed and alternatives will be sought. There are not only four auditors in the world. We are going to look for the most important ones, those that follow them. These may be national if they have the international guarantee seal. It is a country’s commitment to the Monetary Fund (IMF), since the multilateral is interested in rendering accounts of the money it lends. This is the biggest company in the country and it can be a bottomless hole.
The Chamber of Energy said that it would not be worth going to national companies and that rather certain bases of the contest in reference should be reviewed, how do you see that proposal?
Yes. They can be the local branches of the big ones that have respectability. They must be accepted internationally. It must be remembered that this does not cost the country, since they are IDB resources and must be solved as immediately as possible. I think that by the first quarter of 2023 it could already be solved. The audit will be a great step to clean up Petroecuador.
How do you see the issue of gasoline in the country, and its future?
Petroecuador introduced two types of better quality gasoline to the market: 89 octane and 95 octane, whose prices are free. Meanwhile, prices are frozen for ecoplus, extra and diesel gasoline. The Primax company made the historic first import made by a private company on December 25. It brought 25,000 barrels that will be sold at its gas stations. Let’s hope that the private company will continue to import the released fuels.
Another interesting topic this year was the renegotiation with China. What happened to the contracts that were not signed due to the departure of former manager Noboa?
I really don’t know what to say. I would only like to conclude that there was indeed a renegotiation. In terms of volumes, a deferral agreement was reached and that is why in 2023 we will have 40% of crude freely available to sell it in spots or long term, compared to 10% that we had before. There was an improvement in the contracts we had with China.
What will happen to Petrolia and what, instead, will be the treatment given to the termination of the contract with OCP?
On December 31 at midnight, blocks 16 and 67 return to the State. They will be managed temporarily by Petroecuador and they are expected to be put out to tender as soon as possible. Petrolia is invited to participate in that tender. In the case of the OCP, the contract ends on December 31, 2023. There is one year to negotiate.
How do you rate the performance of the Petroecuador manager? It raises doubts because he does not appear on the scene, there is no certainty as to how much knowledge he has of the oil issue… What do you think?
He is a person who acts with a low profile, he is a lawyer with great legal knowledge, very solid and ethical. There is confidence in him as to his seriousness and honesty. He is surrounding himself with good advisors, but about the results, let’s wait. He is a few months old, you have to watch him a little more. He is not an oil technician, but he is a guarantee of good management at Petroecuador. It is not convenient to be changing authorities every time. Every official is under observation.
What happened to the subject of the Comptroller’s complaint and examination of an alleged offshore of your property?
The certificates that I have nothing to do with this company offshore They have been in my hands for many years and I will hand them over to the Comptroller. These apostilled documents show that since the beginning of 2020 I have no relationship. It was a company made in 2015 when I did not plan to return to the public sector. I will hand them over to the Comptroller. (YO)
Source: Eluniverso
Paul is a talented author and journalist with a passion for entertainment and general news. He currently works as a writer at the 247 News Agency, where he has established herself as a respected voice in the industry.
