IN November 2023 marks the 20th anniversary since OCP started operating the heavy crude oil pipeline, within the concession that the state gave to a consortium of oil companies. The contract stipulated that the company had to build the pipeline and operate it for 20 years, during which it had to recover the investment and make a profit. After that time, the infrastructure must be returned to the state.

However, there is currently a discussion about what will happen to that contract, in the midst of the transition to a new government and what the companies that now manage OCP want: to extend the contract and not to cancel the infrastructure. All this, bearing in mind that the state does not have funds for investments or maintenance, nor for the construction of a new variant, which is necessary to avoid destruction, as part of the problem represented by the regressive erosion of the Coca River.

Contradictory voices are heard on this topic.

Oswaldo Erazo, expert in petroleum issues and executive secretary of the Chamber of Petroleum Products Distributors, explains that at first sight it is not convenient for the state to extend the term of the OCP contract. Instead, what would be convenient would be for this infrastructure – in which With the contract, the private company invested 1.475 million dollars – it will pass into the hands of the state and now it will be able to use it.

It is about the fact that OCP invested those 1.475 million dollars, according to data from the company itself, to have that infrastructure. Erazo says that Article 12.1 of the contract stipulates that on the day the contract is terminated, the private company will transfer its shares to the state. The contract is terminated at the end of the term, by unilateral declaration in case of force majeure and by agreement. In this case, the first factor applies.

In this sense, it indicates that the OCP is responsible for restoring the infrastructure, and Petroecuador, on behalf of the state, would receive this infrastructure. Currently OCP, which transports 149,000 barrels per day at $2.14 per barrel, has an income of $318,824, which in one year amounts to $116,370,000. That money could go to the state.

Erazo comments that the approaches of the Minister of Energy have been made public, Fernando Santos Alvite, with OCP companies for the extension of the contract and that the offer is to make a definitive variant for the Coca River problem. According to Eraz, this offer could not be fulfilled if it is taken into account that OCP has not made a safe variant in 20 years.

In addition, he clarifies that, since the government is in the last months of its administration, it is not convenient for it to make such a delicate decision, especially bearing in mind that this government has had no success in oil and energy policy. “This government has not made much progress in oil policy in these two years. There is no such thing as success, so when you finish you shouldn’t make hasty decisions,” he says.

For Henry Llanes, president of the National Front for the New IESS, the contract with OCP expires in 2023 and according to the contract there is a “legal and contractual obligation to return to the Ecuadorian state ownership and management of the said infrastructure”. With regret, the ministry claims that the contract will be extended because it is necessary to build the final variant for the OCP, and the state company does not have the resources for that. It would be illegal for Llanes to extend the validity of the contract, since the Hydrocarbons Act does not provide for it.

In the meantime, Alberto Acosta Burneo, editor Weekly analysis, assures that the big problem is that the state does not know how to properly manage this type of property. In this sense, he believes that it is best to re-award the contract by renegotiating the concession. He explains that this could not be done under the same conditions, because it is no longer the same when the company will build a gas pipeline from scratch, but when it needs to be managed and maintained and make other investments such as a variant.

It shows that if the concession is granted again, the state will have a guarantee that it will function as before, in good condition. He states that Petroecuador should continue to concentrate on investing in production, but unfortunately this did not happen, so it is clear that he would not have the funds for OCP. “The ideal is to get rid of the burden, renegotiate based on operating and maintenance costs,” he says.

When asked if it would not be more beneficial for infrastructure to return to the state and make a new concession with a few interested parties, Acosta claims that Ecuador’s problem is that there are fewer and fewer people interested in investing in the country. He comments that political problems, the problem of the Yasuní consultation, are scaring investors. It would not be convenient to go back to zero, if at least now there is already an interested party, which is the same company OCP. “We have to keep the few investors we have left,” he says.

These days, Pampa, which is currently the majority shareholder of OCP, after buying shares from Repsol and other companies, and the Minister of Energy, Fernando Santos Alvite, have made statements suggesting that there is no agreement yet. .. what would be the amount of the contract in case of renewal.

The minister insisted that he would try to resolve it before leaving. As for which way the OCP issue will go, he said it depends: “If the infrastructure is transferred to the state, we would enter into a new operation and maintenance contract, but if the thesis is to extend the contract and remain in the hands of Pampa, then it would be an extension. They are semantic figures”, he specifies.