The debate on the possibility of maquiladoras of Ecuadorian oil in international refineries is growing again in the light of the proposal presented last Sunday, through an official letter, by the current director of international trade, Reinaldo Armijos, to the current director general of Petroecuador, María Elisa Soledispa.

In his letter, Armijos, who was undersecretary for hydrocarbons together with Hugo Aguiar and now holds that office in Petroecuador, reports that his administration has begun efforts, processes and strategies since October 2022 so that maquila processes can be carried out abroad.

It also requests the formation of a committee that will evaluate, establish and generate mechanisms that enable the implementation of this project. He also explains that in the coming weeks “they will have confirmation of visits by delegations of companies that are interested in this issue, which will be communicated to their office in time.”

The consortium will finance the Esmeraldas refinery with funds from DFC, Biess and others

Armijos states that as part of the procedure:

Although several steps have been taken, and international delegations will be invited soon, Armijos’ proposal does not seem very viable for now, mainly because the law does not allow it.

In fact, the Economic Development Law approved in November 2021 made changes to the Hydrocarbons Law. Article 132 of the law allowed “inside or outside the country through contractual mechanisms that allow the state to directly subcontract its refinery to refining companies of recognized technical and financial capacity, adding value to hydrocarbons to optimize derivative costs.”

However, in October 2022, the Constitutional Court struck down everything related to the hydrocarbon reforms, considering that they have no material unity with the rest of the law. So the first obstacle to the proposal is that there is no law that allows it.

Meanwhile, there are differing opinions on the validity of the proposal.

Energy Minister Fernando Santos Alvite believes that this is a good proposal, especially considering that 7.6 billion dollars were imported last year. However, he warns: “You have to analyze it well. What can be saved deserves to be studied”.

It is also stated that the processing of crude oil by derivatives is a process used by many countries. When asked if this would mean, for example, the closing of refineries or if the refinery surge projects or the new Costa refinery could be cut short, the minister said that this maquila process will not create noise with these other ongoing projects, as it will be short-term program. The rest are medium and long-term, he adds.

https://www.eluniverso.com/noticias/2021/01/05/nota/9314560/refineria-concession-25-anos-financiamiento-biess-dfc-enero-2021/

According to Oswald Erazo, executive secretary of the Chamber of Petroleum Products Distributors (Camddepe), it would be positive as long as the law allows it. In addition, he believes that if this were to be done, the distance from the refinery should be taken into account, because the further it is, the higher the freight rates and costs in general.

Third, it indicates that there must be stock the crude had to be refined. He explains that this third condition would be fulfilled because after renegotiations with Petrochina, crude oil was released for export, which could go to refineries where maquila would be made.

He specifies that currently the price of derivatives is significantly higher than the value of crude oil: before the difference between a barrel of derivatives and a barrel of crude oil was 20 dollars, and now it is 40 dollars. According to Eraz, high refining costs in the world are due to the fact that refining capacity is limited.

Meanwhile, Henry Llanes, an oil expert, assures that the law does not allow this, but that, if possible, the costs of refining crude oil in Peru, the USA or Central America should be examined. For Llanes, the proposal conflicts with the possibility of restoring power and building a new refinery in the country.

It is not the first time that crude oil processing has been talked about. When the former manager of Petroecuador Hugo Aguiar was the Deputy Minister of Hydrocarbons and Reinaldo Armijos himself was the Undersecretary of the branch, Ítalo Cedeño (at that time the manager of the state oil company) had already presented a request for the Ministry’s authority to prepare a law that allows you to move forward.

At that time, the Law on Economic Development was in force in all its segments, and the Court had not yet ruled on the unconstitutionality of the part of the law related to hydrocarbons. However, this time there was no response.