The Minister of Energy and Mining, Fernando Santos Alvite, explains how the negotiations are progressing with the indigenous communities that have prevented the normal operation of the four oil blocks, the policy on associated gas and natural gas and ensures that the Amistad and lighter gas tenders will be accelerated. For Minister Santos, what happened with the last soft tender was a mistake made in good faith by Petroecuador and he is calling on Amazon Tech to re-bid.

How is oil production going and how was it affected by the problems in the four blocs, have the dialogues progressed?

Dialogues are good. This is being negotiated and Petroecuador accepts reasonable requests. There is already a contract for blocks 61 and 43, but negotiations are still ongoing for blocks 12 and 16. An estimated 300,000 barrels have ceased production, representing about $18 million less in revenue, due to these social issues. The problem is that they are looking for a solution to their lack of housing, health, education, and roads. These issues must be addressed by the respective ministries, the social benefit delivered by Petroecuador to the communities in the areas of influence is maintained. In block 16, the company Petrolia made offers to the leaders, which Petroecuador does not consider fair and which would upset the balance with other communities. We hope that they will come to their senses, that the violence will stop and that the operations will continue.

But these disadvantages are forcing a revision of the target, and even more so due to the drop in the price of crude oil. What is the result seen with Finance?

The Ministry of Finance requested an analysis from Petroecuador on realistic production targets. At the end of 2022, Petroecuador was producing 490,000 barrels per day, with a planned increase to 520,000. The 30,000 was to come from the Ishpingo field, which looked very promising. Unfortunately, as in the oil industry, the reality is different. This oil is of very low API quality, which makes it unmanageable, and secondly, water depletion causes production to stop in a short time. Because of this, the target must be reconsidered, but Petroecuador has environmental permits to drill in other fields and could be compensated with that.

Minister, you promised that Campo Amistad will come out in December 2022, now tell me the exact date when it will go out to tender and what treatment will be given to the proposal from the Dominican Republic that showed interest?

At last week’s meeting, it was put on the calendar that the basics of Amistad’s competition for the Board of Directors will be presented in April. The idea is to announce a tender in which interested companies will participate, including the Dominican Republic. At the moment, we still need to formalize the clarification that the decision to protect eight miles of the sea coast does not affect the issue of gas because it is a clean fuel. The two ministries of energy and environmental protection are currently working on the aforementioned resolution.

You and the Petroecuador authorities have assured that 112 flares have gone out in the Amazon, but experts say that this would mean either a drop in production or that they are releasing gas into the atmosphere, or that they are taking the gas away with other flares and the pollution has not really decreased. What is happening?

I’m honest, I don’t deal with those technical issues. In general, I can tell you that several lighters have gone out, the number of which exceeds 100. This means a reduction in production. Old wells that produced less oil but had gas were closed. Some are closed, and in others gas is used for electricity generation and heating systems used in production. Unfortunately, turning off the lighter means reducing production, but more important is the concern for health and the environment. We do not release gas, it is forbidden.

What will happen to the tender to capture the lighter?

The idea is to re-announce the tender for the capture of that gas for the production of electricity or for the production of derivatives such as natural gasoline. Due to an omission in the bidding process, it became necessary to declare it null and void. I heard that the gentlemen from Amazon Tech (who won the previous contest) want to take the case to justice. In every tender, it is a prerequisite that the state reserves the right to declare it null and void without compensation. Of course, it is your right to go to court, but I publicly invite you to participate in the new competition.

The gentlemen from Amazon Tech said that the reasons presented by the state were not solid, do you think there was a reason to terminate the contract they had already received?

These are Petroecuador’s internal processes and there is a report from the legal advisor that issues such as going through the board of directors have not been met. It is worrisome that the invitation did not state that a guarantee of the seriousness of the bids was requested, but this was done later in the questions and answers, and the interested parties did not have enough time to comply with this guarantee issue. Let’s hope the next tender leaves the directory within legal parameters. I repeat that we would like Amazon Tech to participate.

Couldn’t talk to these entrepreneurs directly?

I invited them to my office, but they told me that the executives were no longer here. The company’s legal counsel was requested to meet with Petroecuador’s legal counsel, but this did not happen.

Do you think this mistake by Petroecuador was innocent or just another excuse to drag on and continue with the always talked about concessions for importers?

I would believe it was a mistake in good faith, a product of the unfinished merger between Petroecuador and Petroamazonas, which have different rules. This declaration of free space does not favor importers, because no one imports natural gas. What I have to clarify is that this is a historical mistake, because in 1972, when Admiral Jarrín Ampudia was a minister, Texaco started production and asked him what to do with the gas associated with oil production. The minister said that it was not touched upon because their contract was only for the use of oil. Since that time, no one has come across that gas and had to burn it. The board of directors will ensure that a tender is made, i.e

But is there a rush or not to announce the tender for capturing gas and the Amistad field?

Petroecuador is aware that these processes of Friendship and gas benefits have been delayed for a long time and must be accelerated. The manager promised to publish the tender in the next directory.

About the Administration. Now that you say that the manager of Soledisp has already committed himself, the election of a new government has also been announced. Who are you considering for that position and do you think it will mean returning the gas issue to zero?

We are still honing the shortlist, there were many managers, we want a good shortlist to come out with high level professionals. I want to emphasize that the Soledispa engineer is also an excellent expert and took over the management with full responsibility. This will not affect the gas issue, as the committee is committed to speeding up those two processes.

And on the other hand, how are other projects progressing that would use imported gas due to their characteristics? Apparently these are prioritized?

There are currently two processes that the Ministry is implementing. One is the production of unconventional energy of 500 megawatts, in which the magnificent offers of solar, wind and hydropower plants have been obtained. The companies have already been qualified, and the contracts are in the process of negotiation. There is also a combined cycle that is 400 mw of clean energy, referring to plants that use natural gas as fuel. Since our country is more oil than gas, this gas would have to be imported. But this is cheaper than oil, and of course it is cheaper than diesel. If there will be import costs for the production of electricity, but without subsidies.

Of course, it is less than diesel, but imports create more costs than internal production. Wouldn’t it be better to promote local production?

Unfortunately, nature has given us a lot of oil, but Amistad’s production is minimal, equivalent to 4,000 barrels, and could be doubled or tripled. However, we currently do not have that gas. In the future, domestic production will be used if it is cheaper.

Another worrisome question is how fuel import costs have been rising, what is the solution?

The import of derivatives is a real drain on the country, last year we imported 7.6 billion dollars of derivatives, which we sold at half the price with huge subsidies. Diesel is the most serious thing. In January 2022, diesel consumption was 2.8 million barrels, while in January 2023 it was 3.5 million barrels. This increase does not reflect the growth of the national economy, but unfortunately, due to the price difference with the neighbors, a large part of this diesel is diverted into smuggling. Likewise, while in January 2022 the total consumption of derivatives amounted to 7.2 million barrels, in January 2023 it increased to 9.2 million barrels. This is not normal behavior, but reflects the diversion of fuel to neighboring countries or maritime smuggling, a result of price freezes. As long as it is cheaper, no matter how many police measures are taken, abuse is impossible to avoid. Measures must be taken to ensure that the subsidy benefits those who need it.

But there were already months of dialogue about this, although the opposite measure was agreed upon: to cancel the subsidy for the few. Why hasn’t progress been made?

The Ministry of Public Works is working on this issue, but the public must be aware that this issue is important.