Ecuador's state owned Petroleos del Ecuador (Petroecuador)(16886 bytes) has signed five production sharing contracts (PSCS) with foreign oil companies covering exploration in that country.
In addition, the government is considering renegotiating service contracts that private companies work under to develop oil fields and converting the contracts to PSCS.
Meantime, Petroecuador has received bids from three groups for the long delayed expansion of Ecuador's main crude oil pipeline.
EXPLORATION
The five PSCs Petroecuador signed with winning bidders represent combined potential spending of about $140 million.
All five were signed this year, following the May 31, 1994, start of Ecuador's seventh bidding round for exploration acreage.
That round offered tracts covering 8 million acres (see map, OGJ, Feb. 7, 1994, p. 38). It also was the first exploration bidding round since Ecuador in October 1993 introduced legal reforms intended to end Petroecuador's domination of the country's petroleum industry.
Each of the contracts covers almost 500,000 acres. At least three other PSCs are under negotiation.
Meantime, a participation contract with units of BHP Pty Co. Ltd. and King Ranch Inc. is being negotiated after signing of a memorandum of understanding last year (OGJ, Oct. 17, 1994, p. 48). That involves developing gas reserves in the Gulf of Guayaquil and a related electric power project. The holdup is downstream. Details for operating a gas fired power plant to take the gas are still being ironed out.
PSCS CONSIDERED
Petroecuador will conduct audits of all service contractors' operations after a recent high level report showed a poor take for Petroecuador from Block 16 operated by Maxus Energy Corp., Dallas.
The state company plans to conduct a similar audit of all service contractor operations in Ecuador. In addition to Maxus, Elf Aquitaine, Occidental Petroleum Corp., Oryx Energy Co., and Ecuadorian firm Tripetrol SA operate blocks in Ecuador under service contracts.
Petroecuador's take from these operations is net of service contract fees and money reimbursed to service contractors for capital investment.
Preliminary studies show this take is about $1.91/bbl from Maxus, 64/bbl from Oxy, 14/bbl from Oryx, and zero from Elf and Tripetrol. Quito figures Petroecuador's take will rise if service contractors convert their contracts to PSCS.
Following a 2 month audit of Maxus operations on Block 16, a report by the auditing group, made up of former Petroecuador chairmen, showed some setbacks and difficulties in implementing Maxus' service contract.
Those operating setbacks were made worse by the recent purchase of Maxus by the former state oil company of Argentina, YPF SA (OGJ, Mar. 12, p. 20), and the recent death of YPF Pres. Jose Estenssoro. Estenssoro died in a plane crash near Quito while en route to talks with Ecuadorian Energy Minister Galo Abril about operations on Block 16.
Some Ecuadorian officials have complained about the poor net proceeds to Petroecuador under the Maxus service contract, delays in developing fields on Block 16, and similarly poor results from Tivacuno oil field that Maxus operates under a separate service contract near Block 16. Those officials contend that Tivacuno operations are not profitable enough and claim the contract signed 3 years ago is illegal.
YPF and Maxus disputed all of the government's claims and emphasized the huge capital outlays made to date under Maxus service contracts in Ecuador.
To date, investments in Block 16 total $660.4 million and in Tivacuno field $43.2 million. Since the start of second half 1994, revenues to the state are $7.5 million from Block 16 and $16 million from Tivacuno. Production from the two operations totaled 8.4 million bbl of oil to April 1995.
Maxus and YPF stressed that high cost measures are in place to protect the jungle environment in the Block 16 area, including construction of a 146 km environmentally sensitive road to the field development site.
Block 16 development is being conducted within the confines of the Huaorani native reserve and Yasuni National Park. Officials of the state and private companies involved have cited Block 16 work as a world class model for oil development in an environmentally sensitive area.
PIPELINE BIDS
Amid a flurry of protests against the trunk line expansion project, Petroecuador last month received bids from three groups of companies.
Ecuador has for a number of years sought to expand the trans-Ecuador pipeline from Lago Agrio in the Oriente jungle region, source of most of the country's oil production, to Balao marine terminal on the coast near Esmeraldas. Current plans call for increasing capacity to 450,000 b/d from 325,000 b/d.
Two groups have qualified, while a third, consisting of Mexican, Brazilian, and Ecuadorian companies, failed to qualify after Petroecuador reviewed documents submitted with its bid and decided they lacked experience and financial strength.
The first group to qualify consists of Canada's Interprovincial Pipeline Inc., the Argentine unit of Italy's Techint, Brazil's Odebrecht SA, and the U.K. unit of Enron Development Corp. The second group to qualify consists of Mexico's ICA, Spanish companies Entrecanales and Cubiertas Abengoa, Williams Cos. Inc. of the U.S., and Ecuador's Tripetrol SA.
Petroecuador reviewed qualifying documents last month and is reviewing technical and economic documents. Contract award is expected in 90 days.
Estimated project costs under the two qualified bids are $555 million for the Enron group and $668.9 million for the Williams group. Their proposed tariffs, averaged during 1996-2007, are $1.1996/bbl and $1.4336/bbl, respectively
The expansion project is to be carried out on a build-operate-transfer basis. It calls for looping the transEcuador line, adding storage at Lago Agrio and Balao, expanding the Balao terminal, installing automated controls system-wide, and adding a spur line from Triunfo Nuevo to Condijua.
The expanded system will transport medium gravity and heavy crudes to Balao in batches.
The winning bidder will secure financing, build, and operate the expanded system for 12 years before turning it over to Petroecuador. It will receive a tariff designed to cover amortized and operating costs.
The project has run into opposition on political and environmental grounds, but Quito has given it a green light. The government considers the project a cornerstone of efforts to expand production in the Oriente.
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