Millionaire fall in resources and more expenses for 2022 generates the advance of regressive erosion in the El Reventador sector

The regressive erosion, a natural phenomenon that extends along the Coca, Quijos and Piedra Fina rivers, in the El Reventador sector (Napo), and that threatens the strategic complex of the sector (pipelines, Quito-Lago Agrio highway and Coca Codo Sinclair), represents a millionaire drop in income and more expenses to the country.

The impacts are barely being calculated, but what is known is that the figure produced by the drop in oil production, drop in exports and the costs of restarting the shutdown wells would exceed $ 600 million. Only for the 2022 budget would be a reduction of between $ 250 million and $ 350 million.

This is without counting the expenses incurred so far for the seven variants built to keep the Trans-Ecuadorian Pipeline System (SOTE) and the Lago Agrio Quito pipeline in operation (about $ 16.2 million) and the expenses since private sector with nine variants of the OCP (reaching $ 31 million). To this must be added the cost of the variants that were made to guarantee the passage to Sucumbíos and that have now been lost. Other additional costs have to do with the mitigation works for the phenomenon to protect the Coca Codo Sinclair catchment works.

According to Ministry of Economy and Finance, disruption (unexpected suspension) in pumping Ecuadorian crude through the Trans-Ecuadorian Pipeline System (SOTE) and the Heavy Crude Oil Pipeline (OCP) will cost about $ 600 million between December 2021 and April 2022.

He considers that there will be a fall of almost 90% in the country’s oil production, which will result in lower exports of Ecuadorian crude and additional imports of derivatives. Finance said that if the works schedule proposed by the Ministry of Energy and Non-Renewable Natural Resources is met, Exports would fall by about $ 500 million, with a more marked impact in December 2021.

Complementarily, it is estimated that some An additional $ 80 million in refined fuels and other derivatives to satisfy domestic demand. In addition, the workover process for wells whose operations are suspended during the disruption it would amount to almost $ 20 million.

With lower production, lower external sales and higher imports of derivatives, there would be an impact on both growth and the fiscal accounts. On the activity side, a decrease in expected growth by 0.3% or 0.5%, between 2021 and 2022.

While Therefore, the general budget of the State could see lower income between $ 250 million and $ 350 million, while the rest of the effect will be received by the Ministry of Energy and EP Petroecuador. This impact would be recorded mainly in 2022, when the drop in crude sales is reflected in lower tax revenues, says Finance.

OCP and Petroecuador have been working, after the pipeline rupture in April 2020 and the consequent economic and environmental losses, on temporary solutions so that something similar does not happen. Now the new variants are located in the middle of the slope. 400 meters from the erosion, up the mountain.

Roberto Grijalva, spokesperson for the private company OCP, which manages the Heavy Crude Pipeline in Ecuador, explained that so far the company has built eight bypass temporary and two definitive variants. Only the works in OCP have required an investment that currently exceeds $ 31 million between construction costs, studies of various kinds that have been carried out and constant monitoring to make preventive decisions.

When asked if the ninth variant they carry out could already be a definitive solution, he explained that the situation in the Quijos river sector “It has no precedents that can determine or predict what effects it will have in the future.” He added that both public and private companies operating in the sector have invested significant sums of money in studies in the area and the most renowned specialists in the world have been used to assess conditions.

He considers that in order to establish a direct definitive solution, studies and a careful analysis of the best alternatives are required, a process that takes time to carry out. “Erosion, being a natural phenomenon, generates unexpected events that require us to make immediate decisions that allow us to avoid an environmental impact and a service stop,” he said.

Added that They are working hard to restore service and the commitment would be to resume the first week of January 2022.

Meanwhile, Petroecuador reported that so far they have had to build seven variants of the SOTE and five of the pipeline at a cost of $ 16.2 million. The seventh variant is already located on the slopes of El Reventador, which is considered firmer ground, the company explained. The solution would be ready by December 29.

Use of the Colombian OTA is evaluated

The The Ministry of Economy and Finance said that a series of measures is being taken that will mitigate the technical effects as economic of this disruption. On the one hand, the use of the Colombian pipeline system (OTA) is being evaluated to transport part of the domestic production.

Along the same lines, work is being done on advance bidding rounds for field operations in 2022, which could raise production above the current level permanently. These two measures would offset part of the drop in production in the first months of the year. “Meanwhile, on the side of tax revenues, we are working on strengthening collection efficiency measures, which this year have already allowed to improve collection compared to what was budgeted,” said that state portfolio. (I)