The oil pipeline for heavy crude oil (OCP), in the construction of which 1.475 million dollars was invested, was supposed to pass into the hands of the state already 20 years after the signing of the concession contract.

These days, according to official sources from the Ministry of Energy, “transitional tables are being completed in order for the transmission to take place properly”. This is in the midst of “a relationship between the OCP and the Government that is developing on the best terms.”

On November 14, 2003, Ecuador signed a concession project to build a pipeline different from the one the country already had, which was the Trans-Ecuadorian Oil Pipeline System (SOTE). This new pipeline was intended to transport heavy crude oil, which was mainly obtained from the northeastern part of the country.

Several experts and the labor sector are concerned because the deadline has already passed and there is no clear information about the process.

Miguel Robalino, an expert on energy issues, explains that according to the latest reform of hydrocarbon regulations, which was made in 2021, the turnaround must start a year earlier and the commission must be established. At this point, he says, several stages or even a fully defined process should have been completed.

It indicates that former Minister of Energy Fernando Santos has publicly expressed his intention to extend the contract and that OCP will continue to manage it and even invest 200 million dollars in the final version of the route. But then the minister was warned that this is not legally possible. He explains that he learned from Petroecuador sources that the process has not started. For Robalin, this lack of respect for the law was influenced by the position of former minister Santos and even by the constant changes in government. And what could happen in the following days is that some kind of provision is generated that will frame the transition process in legality.

For Robalino, it is necessary for the infrastructure to pass into the hands of the state and to show that the concession figure is a good contractual figure, that it is not actually privatization and that it allows the construction of infrastructure in the hands of private investment and that it can then be used by the state. He says that after 20 years the infrastructure can pass into the hands of the state and have a service life of at least another 25 years. In any case, it indicates that it would be good for OCP to be concessioned again, because Petroecuador is not a good manager, and an example of this is what happened with block 16-67, which reduced its production.

According to Oswald Erazo, secretary of the Chamber of Petroleum Distributors (Camddepe), the contract with OCP ended on November 14, 2023. However, the date mentioned for the end of the contract is January 2024. He explains that what should happen is that the infrastructure passes to the state and it decides whether to return it to the concession. In that case, a rate that benefits the state must be defined.

Let’s remember that in the last months of Guillermo Lasso’s government, then Minister Fernando Santos talked about extending the deadline to the companies that were in charge of the pipeline, including Pampa. It is currently unknown what happened to that intention. The correct way to value assets should be replacement, not just depreciation. For Erazo, Ecuador would receive at least $1.5 billion in infrastructure, the cost of construction.

As for work, he believes that OCP will not have any problems, because the workers will continue to work normally, now under the state oil company.

Meanwhile, David Almeida, general secretary of the National Association of Energy and Oil Workers (Antep), comments that there is a worrying and suspicious silence on this issue, and the workers’ position is that this infrastructure should be returned to the state because there is no reason to expand it. He says that according to his calculations, the state would save about $2.2 billion by ceasing to pay rates over the next 20 years, and get about $300 million in profits instead. For Almeida, it is also difficult to understand how OCP reported a profit of this amount until 2020, but since 2021 it has not recorded a profit and a rather large outflow of capital.

For Almeida, the concession was supposed to end on November 14, 2023, and they did not know about the extension. In any case, he explains that an information transfer committee should have been formed for the transfer of infrastructure. “As far as is known, that did not happen. It is possible that this is happening in a non-public way.” He also assures that Petroecuador will be able to manage this infrastructure since it has successfully managed SOTE for 50 years. It also mentions that what happened to blocks 16 and 67, namely the decline in production, was initially caused by community protests.

What does OCP consist of?

The built infrastructure covers 485 kilometers of its route, the OCP has a steel pipe with a diameter between 24 and 36 inches and in its ascending part passes through four pumping stations: Amazonas, located five kilometers from Nueva Loja; Cayagama, located in Gonzalo Pizarro, in the province of Sucumbíos. Also Sardinas, in the Quijos Valley, in Napo, 1,802 meters above sea level; and Páramo, in Papallacta, also in the province of Napo, at an altitude of 2,862 meters. According to the company, there are also two pressure reduction stations: Chiquilpe and Puerto Quito, located in the descending section of the pipeline, after it has reached, at its highest point, 4,064 meters above sea level.

In Esmeraldas, OCP has the seaport of Punta Gorda, Balao sector, with a storage capacity of 3,750,000 barrels of oil.

Reversion

Regulation of the Energy Regulation and Control Agency