Ecuador declares force majeure in the oil sector due to erosion in the Amazon region

Ecuador’s government said on Monday that it declared force majeure on crude exports and production contracts, after erosion in the Amazon region forced it to stop pumping in the two pipelines operating in the country.

The state pipeline SOTE and private heavy crude oil company OCP decided to suspend pumping last week as a preventive measure against the advance of the erosion of the Coca river and its tributaries.

The SOTE transports 360,000 barrels per day (bpd) and the OCP, with a capacity of 450,000 bpd, was pumping 180,000 bpd before the measure. In both pipelines variants are built in their pipes to minimize the impact of the natural phenomenon.

The Ministry of Energy said in a statement that the state-owned Petroecuador will carry out the progressive shutdown of wells, which “It will imply the closure of fields, according to the availability of storage in each one of them and in the tanks of the SOTE and the OCP”.

It also declared force majeure for oil companies that maintain contracts under the modality of provision of services. “With this declaration, action and contingency plans are already being implemented to minimize the impact of the situation throughout the hydrocarbon chain,” the ministry added.

There was no data on production and exports affected by force majeure. Ecuador extracted an average of 485,000 bpd before force majeure. On Sunday, production fell to 251,118 bpd, according to government data.

The force majeure envisaged in the contracts allows the country to suspend certain commitments when an unforeseeable circumstance such as erosion occurs, which has put the oil infrastructure at risk, the ministry explained.

Regressive erosion along the Coca River began last year and is affecting, in addition to the pipelines, the water intake of the Coca Codo Sinclair hydroelectric plant, the largest in the country, and one of the main roads that connects to the capital Quito with the Amazon.

Now the erosion is advancing along the course of the Piedra Fina river, in the province of Napo.

Petroecuador has built six variants of the SOTE and is in the development of the seventh. While the private operator OCP Ecuador has eight temporary variants in operation, two definitive and is building one more.

In April 2020, both pipelines suffered a pipe rupture due to the subsidence of land in the area due to the natural phenomenon, which led the country to declare force majeure in its exports and lower its production levels.

The government said that the trading of derivatives in the local market was guaranteed.