Ecuador's oil policy hits another roadblock

Indigenous opposition, organized by confederation Conaie, is emerging as a roadblock to Ecuador’s hydrocarbons development.

A Conaie-led national strike last month led President Guillermo Lasso to repeal a decree that promoted the hydrocarbons sector. Due to the 18-day strike, the country lost around US$1bn.

Ítalo Cedeño, president of state oil company Petroecuador, told an online press conference that while the repeal will not hinder investments in doubling production to 800,000boe in 2025, it will make achieving the goal more difficult.

In negotiations with Conaie, Lasso promised to not expand oil areas, meaning tenders for exploration in the southeast will be scrapped, Alberto Acosta, an analyst at local consulting firm Grupo Spurrier, said during a webinar.

“Now efforts should be focused on improving extraction in mature fields and boosting intra-field production,” he added. Intensifying extraction in established oil areas will require more investment.

OBSTACLES

Participation contracts, in force since last year, provide an attractive framework for private investors, according to experts.

However, investments are also complicated because of prejudices of mid-ranking Petroecuador and energy ministry officials, who consider oil should be produced exclusively by the State, although Petroecuador has only limited resources, according to Acosta.

These views are contrary to government policies and objectives, to which would add lobbying against Petroecuador awards by parties that don’t win tenders, Acosta said.

MEGABLOCKS

Petroecuador-owned blocks 43 and 31, New Stratus Energy’s block 16, the heavy crude Pungarayacu field, and the Amistad natural gas field will be crucial for the planned national production increase.

Cedeño told BNamericas in March that Petroecuador was developing the conceptual phase to unite blocks 43, 31 and 16 into a megablock.

Block 43 produces around 57,000b/d, block 31 some 4,000b/d, and block 16 15,000b/d. United they have potential for 250,000b/d, according to Cedeño.

Although the development of the southeast could not materialize, Grupo Spurrier president Walter Spurrier told the webinar that the government could develop oil fields near the Peruvian border, close to Petroperú assets, and which don't have indigenous populations.

“The government should not cede in that part of the southeast; the crude could come through the Peruvian pipeline,” Spurrier said.

Negotiations between the government and indigenous representatives will continue through September to define issues, especially related to oil and mining, to be included in the initial agreement hammered out to end the protests.

The agreement potentially could reorganize the hydrocarbons and mining sectors, and the government's policy aims.