There is a risk of non-compliance with exports, shutdown of wells and closure of fields due to not being able to pump crude
The The national government declared force majeure for oil companies that maintain contracts under the modality of providing services in the country. It was done by the Ministry of Energy and Non-Renewable Natural Resources (MERNNR), through Resolution MERNNR-VH-2021-0035-RM December 12, 2021.
This due to the problems that are generated by erosion from the Coca River that has already spread to both the Quijos River and the Piedra Fina River. The threat currently looming in the sector has led to stop the transportation of oil through the Trans-Ecuadorian Pipeline System (SOTE), as well as derivatives in the Shushufindi Quito, Petroecuador pipeline and the Heavy Crude Pipeline (OCP) of the private company.
According to Petroecuador, “force majeure is a clause established in oil contracts that allows suspending certain commitments when there is a circumstance that is impossible to resist, unforeseeable, or that cannot be avoided, that causes obstruction or delay, in whole or in part. of the fulfillment of the obligations between the parties, as is the case of the natural phenomenon of erosion that puts the oil infrastructure at risk ”.
The issue generates serious consequences for the national economy. According to the oil authorities, The country could begin to default on commitments such as the delivery of crude for exports and even shut down wells and close fields.
In this regard, EP Petroecuador reported that the Operational Contingency Plan will be implemented through the progressive shutdown of wells. This will imply the closure of fields, according to the availability of storage in each one of them and in the storage tanks of the SOTE and the OCP, said the state entity.
On the other hand, Petroecuador announced that Technical and logistical coordination will be carried out to maintain the supply of fuels on a national scale. It is ratified that EP Petroecuador has the stock enough gasoline, diesel, jet fuel, fuel oil for electricity generation and LPG for domestic use in all its terminals. Petroleum products are normally traded to the public, he said.
According to the Ministry, with this declaration, action and contingency plans are already being implemented, to minimize the impact of the situation, throughout the hydrocarbon chain: exploration, production, refining and industrialization, transportation and storage, and internal and external marketing of hydrocarbons and their derivatives.
Currently emerging variants are being built that allow the pumping of crude oil to resume. Once the EP Petroecuador and the OCP have the technical conditions to resume operations, they must notify the MERNNR and the Agency for the Regulation and Control of Energy and Non-Renewable Natural Resources (ARCRNNR), said the Ministry, however at the moment there is no a probable date for the resolution of the problem.
Miguel Robalino, an expert on oil issues, explained that the current situation is complex, since the country could begin to default on the oil delivery commitments, which depending on the clauses of the contracts it could generate sanctions for the country. He stated that companies that buy oil from Ecuador also have delivery commitments in refineries. Additionally, it indicated that the fact of shutting down wells represents expensive processes.
For Robalino, the Government and especially the Energy authorities that They had already come from the previous government and knew very well the situation of regressive erosion, they have not taken effective measures against the phenomenon. He argued that the variants have cost money and valuable time, without reaching a good result.
Regressive erosion also threatens the power plant Coca Codo Sinclair hydroelectric plant, as it is located 7.9 km away of the catchment works. Additionally, at the end of last week, it was known of the destruction of a section of the Lago Agrio-Quito highway, in the El Reventador sector. Therefore, in the sector there is no step and the Ministry of Transport and Public Works have asked citizens use alternate routes. (I)
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