The lack of production of derivatives such as diesel and LPG at the Esmeraldas refinery cost the country about $248.8 million in imports of these products, just from January to November 2023. This is the calculation made by Darío Dávalos, an energy expert, when checking with the data Petroecuadora on the drop in production in those eleven months, which is the latest available data. During that period, the production of 1,773,263 barrels of diesel for $215 million and 770,320 barrels of LPG equivalent for $33.8 million was suspended.

The figures come amid communications between senior Petroecuador officials that show the Esmeraldas refinery, which underwent a more than $2.2 billion conversion under Rafael Correa’s government, is once again “on the brink of collapse.” The communication was sent by Johnny Alejando Castillo Vivar, former director of Petroecuador Refining, to former general manager Reinaldo Armijos.

The million-dollar renovation, in which the overestimation would have been recorded, never solved the problems of the Refinery, according to the report of the State Inspectorate. Now, in December 2023, the lack of planned maintenance, coupled with the lack of proper management, would take a new toll.

On December 11, 2023, Castillo sent Armijos a memorandum PETRO-REF-2023-1464-M in which he explained that the internal power generation systems, cooling water towers, fire protection network, water and wastewater treatment, storage and transmission “ into a critical state on the verge of collapse.”

He indicated that these areas have serious functional failures that cause operational limitations and have a serious technical impact on production, safety, health and the environment, “therefore, this scenario prevents the Esmeraldas refinery from meeting operational goals.” This would threaten the supply of fuel for domestic consumption in the short and/or medium term.

The communication also talks about the risk of temporary or permanent damage to the mechanical integrity of the refinery line and their auxiliary systems, a situation that would generate a devastating economic effect on the national economy, further deepening the crisis the country is currently going through. This is because – if these problems occur – the government would have to increase the budget for fuel imports, instead of directing it to strengthening internal security, health, education and creating new jobs.

This justifies the need to declare a state of emergency in the refinery in order to negotiate the recovery of the operational function of all the above-mentioned systems. It is also stated that if the problem is not solved urgently, more damage could occur with daily economic losses of over 50 million dollars.

According to Darío Dávalos, an expert in energy issues, the document is the response of the Refinery Management to the General Management on the elements of technical support for the declaration of a state of emergency in the Esmeraldas Refinery, which accelerates the employment processes of preventive and corrective maintenance.

However, what happened would be part of the bad practice that, after failing to carry out periodic maintenance based on a predetermined schedule, it is now being attempted under the looser umbrella of an emergency.

Whether due to inefficiencies or delays due to administrative problems inherent in contracting processes, Dávalos argues that it is contradictory to replace non-compliance with planned activities with the declaration of a state of emergency. He assures that the Office of the Chief State Inspector has already observed a similar practice. “The fact is similar to a student who doesn’t study for the whole year, but tries not to lose the school year in supplementary exams,” he comments.

For Dávalos, there was a lack of leadership, which also stemmed from the instability of general management in the public company.

The lack of preventive maintenance occurred in the FCC unit, known as the heart of this industrial plant. Its last major maintenance was in 2019 and should be carried out every two years. Today, however, Petroecuador plans to implement them in August 2024: “five years later!” he says.

The impact of this lack of preventive maintenance can also be seen in oil processing unit outages.

Petroecuador must somehow cover the gap in the lack of derivatives production that is a consequence of such operational stoppages, for this it has fuel imports on hand. Between January and November, the reduction in derivatives production would translate into higher imports of premium diesel by $215 million and LPG by approximately $33 million.

The current management of Petroecuador is challenged to correct these inefficiencies, in the short term, given the length of the current government’s administration.

The document also mentions that the crude oil being received by the Esmeraldas refinery, 23-24 API, is lower than the average density for which it was designed, 27-30 API, reducing the useful life of its assets. However, in 1997, this industrial facility was expanded to process heavy crude oil from 23 to 27.5 °API. For this reason, Dávalos questions why the Refinery Management issued a report with such claims, when the designed capacity of the Esmeraldas refinery allows for the processing of heavy crude oil?

In addition, in 2018, this industrial facility also refined 24 °API crude oil, according to Petroecuador statistical reports.

In that period, the production of 1,773,263 barrels of diesel for a total of 215 million dollars and 770,320 barrels of the equivalent value of LPG for 33.8 million dollars was suspended.