On November 9, 2023, an unprecedented case in the international oil trade occurred in Ecuador, a company that wanted to participate in the tender announced by Petroecuador to buy 11.16 million barrels of Ecuadorian crude oil – of which 6,840,000 barrels correspond to Oriente crude oil, and 4,320,000 for Napo crude oil – shown differences never seen before: – 85 dollars for each barrel.

The offer was presented by the Chinese company Unipec to the tender, which had two modalities: the first with subsequent payment and the second with advance payment. -$85 was related to another type of sale that was with advance payment. This modality was announced by the management of Petroecuador as an innovative option through which money can be obtained in advance, as a kind of pre-sale of oil.

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However, analysts interpret this high penalty as a “slap” or as a message that this modality has not met with interest.

Unipec itself eventually won the competition, but in the first modality, since it offered a difference of -$3.90 for Oriente and -$9.50 for Napo, within the subsequent payment modality, which is normally used in these operations.

The operation itself received a lot of criticism from analysts.

Although Petroecuador awarded Unipec America Inc. a total of 11,160,000 barrels of crude oil, of which 6,840,000 barrels correspond to Oriente crude oil, and 4,320,000 to Napo crude oil, the prize will bring Ecuador an approximate income of 816.6 million dollars until March 2024, experts believe that it could there may be better offers.

The director of Petroecuador, Reinaldo Armijos, reiterated that by 2024 the country will have 60% of the export balance of crude oil, which will be sold on the market place.

Petroecuador is preparing a $1.2 billion spot sale that commits crude until March 2024.

According to Darío Dávalos, an energy analyst, he believes the company’s message when it proposed this distinction was to say “we give you crude oil and on top of that we give you change.” That’s considering crude oil would have been $77.17 per barrel (WTI as of Nov. 10) at that time. In this sense, he says that the bad result of the sale of crude oil, which was foreseen by advance payment, had several factors.

First of all, Ecuador has shown that it needs money and this desperation generates such a market attitude. In addition, the contractual terms of that operation were not clear. It was not known how the contract would be resolved. Dávalos assures that this quote is registered and could even influence the formulas created by Platts and Argus.

In addition, he believes that November is not a good date for sales, and assures that December could have been much more useful for Ecuador because there is a higher demand for Christmas.

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For his part, Miguel Robalino, an oil expert, points to a sale place Refineries did not welcome him, as for example neither Phillips 66 nor Valero participated. “November is the worst month for refineries that even go on vacation,” he says.

Another question that remains in the air is whether the companies that bid for the first option, which is postpaid, should have been disqualified, but did not do so for the second option, which was not on the market.

In this regard, during the tender itself, one company asked why other companies (Petrochina and Petraco) that also submitted bids, but only for the first modality, were disqualified. At the time, Petroecuador officials indicated that the tender stated that it was mandatory to submit both bids.

For Robalin, what happened is also the result of the compromise of the production, for which we do not know whether we will be able to fulfill it or not. Furthermore, he comments that it is surprising that at critical moments, the director of Petroecuador, Reinaldo Armijos, has already set a deadline for the production of crude oil in the ITT field, since that official indicated that the last barrel from that area will leave on August 31, 2024. (I)