Ecuador pulls tenders of gas field, oil blocks

Market: Crude oil, Natural gas
23/10/18

Ecuador has relinquished plans to tender the 40mn cf/d Amistad natural gas field and downsized its ambitious southeast upstream licensing round.

The round had been expected to cover 10-14 oil exploration blocks but will now feature just two, blocks 86 and 87 near the border with Peru and that country´s northern crude pipeline.

Opposition from indigenous communities living on the southeast acreage forced Ecuador to indefinitely postpone plans to tender the other blocks.

"Although we intended to tender all the blocks, we changed strategy to prevent social unrest," energy minister Carlos Perez said today during the annual oil and mining conference Enaep.

Ecuador hopes to advance conversations to offer blocks 86 and 87 directly to state-owned PetroPeru, during a binational presidential and cabinet meeting in Quito on 25 October.

According to Perez, Quito and Lima are already in talks to tailor an agreement in which Ecuador's state-owned PetroAmazonas, PetroPeru and a third investor party would jointly develop the acreage.

Crude produced at blocks 86 and 87 would be transported through the Peruvian pipeline to PetroPeru´s 65,000 b/d Talara refinery.

Perez told Argus that he does not believe that the remaining southeast blocks will be tendered during the current administration of president Lenin Moreno, who leaves office in May 2021.

Ecuador has also abandoned hopes to award the offshore Amistad field, located in the Gulf of Guayaquil, PetroAmazonas chief executive Alex Galarraga told reporters in Quito.

Amistad was part of PetroAmazonas' May licensing round which also featured two mature oil fields and two small oil fields. Amistad initially attracted no bids.

PetroAmazonas extended the deadline for interested companies to submit their offers, but none of the proposals finally made for Amistad complied with PetroAmazonas' requirement that drilling costs at the gas field should be maintained under $15mn per well, according to Galarraga.

PetroAmazonas is currently seeking an agreement with PetroPeru to develop two gas fields located in the Piura and Sechura basins in Peru.

Galarraga says PetroAmazonas hopes to secure concessions to operate these fields by the first quarter of 2019.

Quito desperately needs an extra 30mn-40mn cf/d that could be liquefied and brought from Peru by ship and unloaded at Ecuador's underutilized Monteverde LPG maritime terminal.

Ecuador already demands at least 90mn cf/d of gas to supply the state-owned 130MW Termogas Machala thermoelectric plant, and state-owned PetroEcuador's Bajo Alto and privately owned gas Vesubio liquefaction plants.

Quito also plans to gradually replace imported diesel and LPG with LNG for transport and industrial activities in Guayaquil, Ecuador's largest city, hoping to help reduce a $3bn government outlay for fuel subsidies, of which some 50pc is represented by the diesel subsidy, according to Perez.

LNG is key to supplying ceramics industries in Cuenca, Ecuador's third largest city, where the fuel is gradually replacing imported diesel and LPG.

Even though Amistad and most of the southeast blocks have been withdrawn for now, Perez said Ecuador maintains its goal of increasing crude production to 540,000 b/d by the end of the year and by 700,000 by the end of 2021, with growth driven by heavy-crude complex Ispingo-Tambococha-Tiputini (ITT).

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