Ecuador could increase oil production but political factors are seen as a hurdle

The oil and mining sectors are expected to be the drivers of 3% economic growth in Ecuador in 2023, according to the latest projections of the central bank.

The bank said oil production this year is expected to average 521,000b/d, up 8% on 2022 but below the 531,000b/d in 2019.

The low production in 2022 was influenced by a series of factors, including problems that affected the country's two oil pipelines, and conflicts with indigenous communities that forced the closure of several fields.

Despite the fact that the country has the conditions for an increase in oil output, the bank’s forecast looks very optimistic, according to an analysis by local consultancy Grupo Spurrier.

“It’s quite an optimistic vision in the face of depressed production. Starting in 2024, we will have to fight hard so that it doesn’t fall further," the president of the consultancy, Walter Spurrier, told a webinar on the political and economic scenarios for 2023 and 2024.

To increase crude production, among other factors, it is necessary to develop new reserves in block 43 (ITT), which is complex due to the opposition of indigenous communities; hire a private operator for the Sacha field to continue exploiting it and to increase reserves; and avoid the seizure of oilfields and sabotage of facilities, as happened last year with the protests led by the Confederation of Indigenous Nationalities of Ecuador (Conaie), says Spurrier.

According to the analyst, there is still an appetite in the world to invest in oil and interest from large companies to look for crude in prospective areas, and Ecuador has the conditions to attract that investment. However, the problem is that there is no political elite that supports development of the oil industry or official plans.

Insecurity and problems with indigenous communities are widespread, says Spurrier.

He added that in Colombia the medium and small companies that operate in Putumayo, the same hydrocarbon basin in which the most important fields in Ecuador are located, will seek to diversify and the logical thing is that they come to Ecuador, which has infrastructure to export the oil.

If those companies are attracted to Ecuador’s small fields, production can increase, Spurrier said, adding that in the case of Yasuní (block 43) large companies could be interested.

However, the government of Guillermo Lasso will have to weather political crises and will not be able to focus on long-term goals, says the expert.