Ecuador, New Opportunities Arise
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Transcript of Ecuador, New Opportunities Arise
PROMOTION // ECONOMIC DEVELOPMENT
2013 promises to be a milestone year for the Ecuadorean
hydrocarbons industry. The new bidding round—called Ronda
Suroriente Ecuador, or Ecuador Southeastern Round—for oil
blocks in the country’s southeast will begin on November 28,
2012, with tendering scheduled for next May and contracts
expected to be inked in the third quarter of the year. With 13
blocks up for offer, a new era of exploration is about to begin
in Ecuador.
“We did not explore enough in the last 15 years,” admits
Wilson Pástor, the country’s Minister of Nonrenewable Natural
Resources. “The last bidding process was in 1995. Reserves are
in remission and our challenge is to attract foreign investment.”
Doing so should not prove too difficult a task, with an esti-
mate of between 370 million and 1.6 billion barrels of reserves
ripe for discovery in the area, according to studies carried out
by the French Institute of Petroleum and Ecuadorean experts.
Only three blocks on offer hold proven reserves, amounting to
just over 100 million barrels, with 2-D seismic data carried out
on 12 of them.
ECUADORNEW OPPORTUNITIES ARISE
Bidding round for hydrocarbons set to boost exploration and foreign investment
PROMOTION 2 // ECUADOR
Ecuador’s Hydrocarbons Secretariat
(known as SHE) is the entity overseeing
the Ecuador Southeastern Round. Set
up in July 2010 under the terms of the
July 2010 Hydrocarbons Law, SHE is
responsible for the nation’s hydrocarbon
resources, including the administration
and amendment of contracts.
“The Secretariat will guide investment
in the oil and gas business in Ecuador,”
says Hydrocarbons Secretary Andrés
Donoso Fabara. “SHE is the equiva-
lent of Colombia’s National Agency of
Hydrocarbons (ANH) or Brazil’s National
Agency of Petroleum, Natural Gas and
Biofuel (ANP). The message we want to
convey is to present ourselves as part-
ners. Our position is to help investment
in the sector.”
Minister Pástor expects investment
in each of the blocks up for bidding
to reach as much as $200 million.
Approximately three-quarters of the
blocks will be available to international
oil companies, while the remainder will
be reserved for state-owned operators
from neighboring nations and Ecuador’s
own Petroamazonas.
Once it begins to flow, oil from the
southeastern blocks will have a fast-
track route to markets, thanks to an
agreement signed this August between
Peru and Ecuador. Operators will have
access to the North Peruvian Pipeline to
ship crude to the Pacific Coast. Minister
Pástor called the deal, which will cost
Ecuador an estimated $10 per barrel,
“true energy integration.”
After a couple of years of uncertainty
in the industry, Ecuador has rewritten
the rules of engagement. The coun-
try’s new Constitution, passed in 2008,
declared oil a strategic asset subject to
state control, changing the playing field
for private-sector organizations. At the
time, foreign-owned firms produced
44% of the nation’s output.
Under the recent hydrocarbons leg-
islation that Minister Pástor helped
push through, the state owns 100% of
production and is paid the first 25%
CORPORATE PROFILE
HYDROCARBONS SECRETARIAT: The Industry’s Partner in Development
The Hydrocarbons Secretariat of
Ecuador (SHE) was established in
July 2010 as the entity in charge of
the country’s oil and gas resources,
and it serves as the industry’s partner
for development. Its responsibilities
include negotiating, amending and
administering contracts; offering
technical, financial and legal sup-
port; and analyzing and quantifying
Ecuador’s existing and undiscov-
ered assets.
Led by Hydrocarbons Secretary
Andrés Donoso Fabara, a lawyer
by training with extensive indus-
try experience, the Secretariat
has its hands full for the next few
years, overseeing the reorganiza-
tion of state-owned companies and
financing projects like the Refinería
del Pacífico. Efficiencies gained
and extra revenue generated will
be used to reduce the country’s fuel
subsidy below 2011’s $2.5 billion.
The Secretariat is also in charge
of promotion to attract regional
and overseas capital to the sector,
including the organization of bid-
ding rounds for new leases. Among
the projects on its agenda are the
reinforcement of the Ecuadorian
Oil Data Bank (BIPE), including 2-D
and 3-D seismic data, well logs
and geographical information. It
aims to provide the industry with
a one-stop source of knowledge
to facilitate decision making and
investment.
At the same time, SHE will con-
duct studies to evaluate potential
resources, exploring more than
67,000 square kilometers off the
coast of five provinces to map
the whereabouts of an estimated
1 billion barrels of crude. And in
2013, it will begin a study for non-
conventional shale
deposits onshore
and offshore.
COLOMBIA
PERU BRAZIL
VENEZUELA
BOLIVIA
PARAGUAY
GUYANASURINAME
FRENCH GUINEA
URUGUAY
CH
ILE
ARGENTINA
COLOMBIA
PERU
Ecuador’s Southeastern Round: The orange area represents
the 13 oil blocks up for licensing.
ECUADOR’S OIL CONCESSIONS
Quito
PROMOTION 3
In a recent interview for this
report, Ecuador’s Minister of
Nonrenewable Natural Resources,
Wilson Pástor—a well-respected
hydrocarbons professional with
more than three decades’ experi-
ence in the sector—spoke about
the future of the country’s oil
industry. Pástor has held a variety
of public- and private-sector roles,
in addition to working as a consul-
tant for the World Bank, and is a
prolific author on Ecuadorean oil
issues. The discussion focused
on the issues facing Ecuador’s oil
industry in the years to come. The
following are some of the high-
lights of that conversation.
ON FUTURE PROSPECTS“I see two lines of development:
The first is to increase explora-
tion; the second is to improve oil
recovery with enhanced tech-
niques. We have signed important
service contracts with some of
the best-known companies, like
Schlumberger, and are going to
extend this for other fields. This
approach, however, has limits, as
we can only improve so much. The
only solution is to increase invest-
ment in exploration and improve
the recovery of reserves.”
ON PLANS FOR STATE-OWNED COMPANIES
“Achieving efficient costs depends
on the situation of Petroecuador
and Petroamazonas. We consider
Petroecuador a more powerful com-
pany downstream that can operate
not only in Ecuador, but internation-
ally in countries like Peru. On the
other hand, Petroamazonas, which
has better international practices,
will take over exploration and be in
charge of upstream.”
ON EXPORT PRODUCTION“Ecuador is now net-exporting
yearly around 120 million barrels,
approximately 60% of our produc-
tion. As internal demand grows in
the medium term, by the end of the
decade we might not be exporting.
This is due not only to field slow-
down and decreasing reserves, but
also to the new refinery, Refinería
del Pacífico, which will produce
300,000 bpd. My vision is optimis-
tic, however, as we have reserves
that are not yet developed. This
is very heavy oil, and some com-
panies would like to invest and
produce up to 200,000 bpd by
applying a new technique using
nitrogen.”
Ecuador Section Project Managers: Eduardo Magaña and Maria Cristina Nadolu
For more information, contact: Gabriel Gutierrez – [email protected]
www.forbescustom.com/ecuador
All statistical data as stated was provided
by the sponsors of this report.
Q&A WITH MINISTER WILSON PÁSTORA look at the future of Ecuador’s oil industry
of income from sales. The decision
was also made to replace existing pro-
duction-sharing contracts (PSCs) for
service contracts, with a flat fee paid per
barrel produced, which could be easily
calculated as conditions and costs were
clear.
“With PSCs, we did not control the
price, and that has been increasing at a
very high rate in real terms,” the Minister
explains. “This generated an imbalance
in the share of profits. The government
wanted to stabilize this and fix a price
that would represent the real conditions
of the field and production.”
A deadline for renegotiation with
majors was set for November 2010, with
smaller companies given until January,
at the risk of forfeiting fields, subject
to compensation, if deals could not be
reached. By the end of the process,
14 of the previous 21 contracts were
signed, providing operators with an
average 15% rate of return at a tariff per
barrel of just over $32.
At present, Ecuador produces about
510,000 barrels per day (bpd) and has
proven reserves of around 3.5 billion bar-
rels, according to official data. Minister
Pástor expects output to increase by
4.7% to 526,000 bpd next year, rising to
530,000 by 2014.
The combination of political stabil-
ity, exploration opportunities and a
well-defined framework for business
has led to a resurgence of interest in
Ecuador’s oil sector, fueling a climate
of confidence ahead of the Ecuador
Southeastern Round. More than $1.4
billion in investment has already been
committed across the sector over the
next three years. “I see two lines of development: The first is to increase exploration; the second is to improve oil recovery with enhanced techniques.”
Political stability, exploration opportunities and a well-defined framework for business has led to a resurgence of interest in Ecuador’s oil sector.
Rona
ld Z
ak/
/AP/
Corb
is
PROMOTION 4 // ECUADOR
TRANSFORMING POLITICAL WILL INTO LEGAL GUARANTEES
“Since President Rafael Correa has
been in power, Ecuador has had the
longest stability in many years,” says
David R. Martin, the CEO of Gente Oil
Global and a 50-year veteran of the
international oil industry. “This means
we have an administration working with
Congress and coming up with laws and
regulations that are clear—all made
possible because of political stability.”
Among the raft of legislation the Correa
government has passed since tak-
ing office in 2007, the new Constitution
of 2008 and reforms to the 1978
Hydrocarbons Law in July 2010 represent
the clearest expressions of the adminis-
tration’s intent to ensure that Ecuador’s
riches are exploited to the benefit of the
nation.
Article 1 of the Constitution specifically
states, “Nonrenewable natural resources
in the state’s territory form part of its
inalienable and absolute assets, subject
to no statute of limitations.” Subsequent
articles deal with the strategic nature of
resources and the state’s exclusive pow-
ers over hydrocarbons, including those in
its territorial waters.
The 2010 amendments to the Hydro-
carbons Law, which was originally passed
in 1978, encompass the state’s respon-
sibility for exploration and production,
joint ventures, agreements with overseas
state-owned oil companies, and the bid-
ding process for leases, overseen by the
Committee for Hydrocarbon Tenders.
The reform also lays out the rules for
private-sector participation in cases
where SHE deems that state-owned
companies do not have sufficient tech-
nological or economic means to explore
or exploit certain areas. In these cases,
SHE is the body responsible for sign-
ing contracts and ensuring that they are
executed correctly.
The principles underlying Ecuador’s
hydrocarbons policy are as follows:
the preservation of national interests
at every level of the industry; environ-
mental respect and sustainability; guar-
anteeing supply; consumer protection;
prioritizing technological development;
promoting exploration; contributing to
industrialization; attracting investment;
developing scientific, technological and
human resources; and improving the
country’s competitiveness on a global
scale.
Repsol YPF Ecuador, the local subsid-
iary of the Spanish hydrocarbons giant,
is one of many major international orga-
nizations confident about the future of
the industry in Ecuador: “We decided to
continue operations here because there
were clear rules to continue in the coun-
try,” says Managing Director Luis García
Sánchez.
CORPORATE PROFILE
ENAP SIPEC IN ECUADOR: A Success Story
ENAP Sipec Ecuador, a subsidiary of the Chilean state-
owned company ENAP SIPETROL, began its operations in
Ecuador in 2003 after Chile and Ecuador signed agreements
for energy-sector cooperation, particularly in hydrocarbon
exploration and development.
Established in 1990, ENAP SIPETROL develops hydro-
carbon exploration and production activities in foreign
countries, taking advantage of ENAP’s professional and
technical teams in search of new business opportuni-
ties outside Chile. At present, it is active in production in
Argentina, Ecuador, Egypt and Chile.
Shortly after its establishment, ENAP Sipec began to
develop two oil fields—Paraiso, Biguno, Huachito (PBH)
and Mauro Davalos Cordero (MDC)—boosting production
to a peak of 22,000 bpd by applying 3-D seismic technol-
ogy, putting in place a drilling program and building new
facilities.
Ten years later, having invested more than $230 million,
ENAP Sipec has extracted over 50,000,000 barrels of oil
from PBH and MDC. More important, the company has
implemented numerous social projects with native com-
munities, focusing on health, education and sustainable
projects. It is ISO 14001 certified and operates a reforesta-
tion program for native species.
Over the last two years, relations between Ecuador and
Chile have improved and the Ecuadorean government
has developed new practices, including the renegotia-
tion of contracts to adopt a new model, known as Service
Contracts, which ENAP Sipec was the first to reach. ENAP
Sipec also signed an agreement with Ecuador’s Minister of
Nonrenewable Resources in November 2010, committing
to new investments, such as an enhanced recovery project
and exploration of a new area called Intracampos.
Consolidating these successes, in October 2011 the
Ecuadorean government and ENAP Sipec signed a new
Service Contract for Block 3J, located near the Gulf of
Guayaquil. It is a huge exploration area that will bring great
benefits to Ecuador, with fresh discoveries in a part of the
territory that to date has been only partially developed. All
this has been achieved, thanks to negotiations in which
Ecuador and Chile share the same goal: to increase ENAP’s
presence in Ecuador with greater investment and technol-
ogy, and to harness potential development in reserves and
production to provide direct benefits to Ecuador.
PROMOTION 5
CHANGE TO CONTRACT MODEL FIXES RATES OF RETURNCompanies can enhance profitability by raising production or lowering operating costs.
The biggest change for private-
sector oil companies working or
planning to work in Ecuador has been
the introduction of service contracts
for exploration and production, rather
than the production-sharing agree-
ments more commonly used worldwide.
The latter expose companies to greater
risk, but, once production begins, allow
operators to offset capital expenditure
before generating profit, at which point
payments accrue to the state.
Soon after coming to power, in light
of spiraling oil prices that benefited
the companies more than the country,
President Rafael Correa decreed that
Ecuador should earn more from the
exploitation of its crude. A 99% wind-
fall tax was imposed, and then it was
lifted following the 2008 financial crisis
when prices plummeted to $30 per bar-
rel, before his administration pushed
forward with plans to alter existing
agreements to pay privately owned pro-
ducers a flat fee per barrel.
As a result of the shift —part of the
reforms made to the Hydrocarbons Law
in July 2010 and implemented via negoti-
ations completed by the start of 2011—oil
companies already active in Ecuador can
make more money by raising production
volume, using existing infrastructure or
lowering operational overheads.
Minister Pástor explains the thinking
behind the change: “We wanted to give
companies a price that would be prof-
itable, with the objective being a 15%
rate of return. This is only for contracts
in production. For new ventures, com-
panies propose a tariff according to
their estimations related to reserves and
production,” he explains. “Because risk
is involved, they can get up to 30% as a
rate of return, so it is much more flexible
and open.”
At the same time, for private-sector
companies working with Petroecuador
on its blocks, integrated service contracts
have been put in place that allow global
organizations like Schlumberger to provide
investment, technology and know-how to
optimize production, improve recovery
rates and aid with exploration.
Rates of return on this kind of con-
tract, fixed for a 15-year term, vary from
15% for optimization services to 25%
for enhanced recovery or exploration.
Payment is made according to an estab-
lished rate per barrel, subject to a base
curve agreed upon by Petroecuador
and the service provider.
REGIONAL COOPERATION PAYS OFF FOR ALL CONCERNEDEcuador begins pumping Colombian crude, while Peru carries Ecuador’s oil to market
Aside from extending exploration
and increasing production at home,
the domestic oil sector is looking to
develop ventures and create synergies
with its counterparts in neighboring
nations. The administration already
has deals in place with every country
along the Pacific seaboard and aims
to foster new relationships in both
upstream and downstream activities.
La Empresa Nacional del Petroleo
(ENAP), Chile’s state-owned giant, was
the first overseas company to sign a
new contract in 2010. The company
pumps 14,500 bpd, and in August it
celebrated producing 50 million barrels
in under a decade. It has invested $230
million in Ecuador to date, and in 2011
it added Jambelí Block 3, located in the
Gulf of Guayaquil, to its interests.
Petróleos de Venezuela, SA (PDVSA)
has worked with Petroecuador in
Ecuador’s Amazon region since 2009.
“Some $374 million will be invested
in the Río Napo Operations joint ven-
ture next year to raise output to 80,000
bpd by 2015,” says Patricio Román,
Río Napo’s general manager. In April,
Petroecuador revealed plans to take
a 14% stake in Venezuela’s Dobokuki
field, where production should reach
50,000 in two years, according to
Petroecuador General Manager Marco
Calvopiña.
In June, Oleoducto de Crudos
Pesados (OCP), Ecuador’s pipeline
company, announced that it would
begin transporting 15,000 bpd of
Colombian crude by the end of 2012,
with the possibility of a tenfold expan-
sion in three years. OCP operates
the 475-kilometer Heavy Crude Oil
Pipeline that runs from the Sucumbíos
region to the Pacific. This could also
be the first step toward a connec-
tion for both nations with Venezuela’s
Llanos pipeline.
“The southeast of Colombia has huge
reserves but lacks transportation,”
explains Minister Pástor. “We have the
OCP pipeline that has a capacity of up
to 450,000 bpd. We are currently trans-
porting only a third of this, so Colombia
is interested in moving the oil they have
through this pipeline.”
And this past August, Pástor inked
a deal with Peru to connect pipe-
lines in a $300 million project to ship
Ecuadorean oil to Peru’s Pacific ports.
The agreement opened the door for
PetroPeru, the national oil company,
to take part in Ecuador’s bidding round
in November, as it plans to return to
upstream activities.
Pástor inked a deal with Peru to connect pipelines in a $300 million project to ship Ecuadorean oil to Peru’s Pacific ports.
President Rafael Correa
epa european pressphoto agency b.v. / Alam
y
PROMOTION 7
STATE-OWNED OIL GIANTS READY FOR REORGANIZATIONInvestments in innovative technology at heart of exploration and refinery initiatives
Scheduled for completion over the next couple of years,
the reorganization of Ecuador’s state-owned oil compa-
nies, Petroamazonas and Petroecuador, aims to reinforce
each as a regional leader in its field. While Petroecuador will
focus on developing downstream projects, Petroamazonas
is set to capitalize upon both organizations’ experience in
upstream activities.
By the end of the year, Petroamazonas plans to have
drilled more than 90 new wells across the five fields
it operates, as part of a
$1.25 billion investment to
expand its current output of
160,000 bpd. At the Oso 54
and 59 wells, located on the
Napo and Orellana blocks,
Petroamazonas began using
a new multilateral drilling
technique last August to
boost production and limit
environmental impact.
According to company
sources, two branches will
extend out from a single
mother bore to cover a larger
area and should start pro-
ducing crude by November.
This approach has been
used successfully in China,
Venezuela and the North Sea
and is 96% effective.
“Our operational and economic indicators show
Petroamazonas has everything that an international oil
company needs to face these projects,” says Oswaldo
Madrid, the company’s general manager. “We have
enormous strengths, because we have the highest inter-
national standards in the oil industry.”
For its part, Petroecuador is concentrating on devel-
oping the country’s pipelines, refineries, ports and trade
to ensure that Ecuador remains well positioned in the
downstream sector. Among the projects on its to-do
list is the Refinería del Pacífico, a 300,000-bpd refinery
scheduled to come into operation by the end of 2015.
A joint venture with Venezuela’s PDVSA, the $12 bil-
lion project is still at the financing stage. This August,
Petroecuador began conversations with China National
Petroleum Company (CNPC) about acquiring a stake in
the new facility.
“Our challenge is to find a shareholder,” says Jorge
Glas, Ecuador’s Minister of Strategic Sectors. “We hope
to reach an agreement with CNPC, but if it doesn’t hap-
pen, we will look for another partner. Other companies are
interested.”
TAKING COMMUNITIES AND CONSERVATION INTO ACCOUNT
Managing resources to protect bio-diverse region
Wherever they oper-
ate in the world today, oil
companies come under
increasing scrutiny to
ensure that they do not
have a negative impact
on the people and the
places in which they
work. While the world
may demand an endless
supply of cheap crude
to fuel economic development, politicians and the
public alike are no longer prepared to pay any price—
either monetary or environmental—for petroleum.
Under President Rafael Correa’s leadership,
the Ecuadorean government has clearly signaled
its intent to protect environmental and human
rights above the potential benefits it could accrue
from exploiting its oil. With its Yasuní-ITT initia-
tive, launched in 2007, the government proposed
an indefinite halt to production at the Ishpingo-
Tambococha-Tiputini (ITT) field, located within
Yasuní National Park. In exchange, it asked that
the international community fund 50% of the
deposit’s value.
ITT contains 846 million barrels, around 20% of
Ecuador’s proven reserves, valued at $3.6 billion. The
problem is where it lies: in one of the richest areas of
biodiversity on the planet. Two acres in Yasuní con-
tains more tree species than all of North America.
Leaving oil in the ground and trees in the forest will save more
than 1,200 million metric tons of carbon emissions.
Ahead of the country’s Southeastern Round, which begins
in November, the Ministry of Nonrenewable Natural Resources
directed Ecuador’s Hydrocarbons Secretariat (SHE) to col-
lect and analyze data from the Amazon provinces of Pastaza,
Morona Santiago, Napo and Orellana to produce a socio-
environmental diagnosis of those areas that oil production
activities would affect.
Adopting a holistic approach, SHE undertook a detailed sur-
vey of environmental parameters, including air quality, rainfall
and climate data, noise pollution, hydrological resources, land
use and ecosystems, to determine what kind of regulations
would be required to maintain existing conditions.
At the same time, a process called Prior Consultation
(Consulta Previa), which brought together local authorities
and communities, included opportunities for dialogue by
means of meetings and workshops to ensure that citizens’
rights were upheld and their opinions heard. The conclusions
of the analysis have been used to inform public policy about
how best to manage the region’s resources from a human and
environmental perspective.
PROMOTION 8 // ECUADOR
CORPORATE PROFILE
Upstream Giant to Expand Exploration and Production
The state-owned company Petro-
amazonas EP is responsible for
Ecuador’s national exploration and
production interests in the strategi-
cally important hydrocarbons sector.
Petroamazonas was set up under the
Public Enterprise Act in April 2010
and was granted financial and man-
agement independence.
Petroamazonas operates Blocks 7,
12, 15, 18 and 21, and is working on
the development of Block 31. Actual
proven reserves are 300 million bar-
rels, and, with 14 exploratory wells
in its program, Petroamazonas EP is
planning to increase reserves by an
additional 100 million barrels in 2013.
At present, Petroamazonas pro-
duces 160,000 bpd, close to a third of
total Ecuadorean oil production. Over
the five-year period ending in July
2012, the company posted revenues
in excess of $13.2 billion.
Petroamazonas is committed to
exploiting its reserves efficiently, safely
and sustainably, and its operations
are ISO 9001, ISO 14001 and OHSAS
18001 certified. The company is also
keenly aware of its social and environ-
mental responsibilities, and of its role
as a major contributor to development
in the country’s energy sector.
An example of this approach is
its Power Generation Optimization
Project (OGE) initiative in developing
in the country’s Amazon district. The
first project of its kind in Latin America,
OGE promotes the use of gas asso-
ciated with oil extraction to generate
electricity, providing cost savings and
reduced emissions, and thereby miti-
gating the company’s carbon footprint.
Petroamazonas has recently initiated
conversations with other state-owned
petroleum organizations in the region,
such as Ecopetrol and Petroperu, to
develop joint ventures and invest-
ment opportunities within and beyond
Ecuador’s borders. At the same time,
at home it will be taking part in the
Southeast Bidding Round to acquire
new blocks for exploration.
The Petroamazonas EP merger
with the Petroecuador Exploration
and Production division, scheduled
for the fourth quarter of 2012, marks
an important milestone in its devel-
opment and growth, and reflects
confidence in its management. The
company will focus on upstream
operations, with a production fore-
cast of 320,000 bpd and assets worth
around $3 billion.
CORPORATE PROFILE
Downstream Leader Focuses on Raising Sector’s Capacity
Established in 1989, EP Petro-
ecuador (the State Oil Company
of Ecuador) is the country’s lead-
ing hydrocarbons company. It
produced almost 200,000 bpd in
the first six months of 2012.
By the end of this year, it will
become the organization respon-
sible for the nation’s downstream
interests—including transport, dis-
tribution, refining and marketing—as
the result of a planned moderniza-
tion process with Ecuador’s other
state-owned petroleum company,
Petroamazonas EP.
According to General Manager
Marco Calpoviña, the company’s
goal is to evolve into a net exporter
of high-quality finished products.
To do so, Petroecuador aims to
build a new $12 billion refinery,
in cooperation with Venezuela’s
PDVSA and other partners, by
2016. It will have a capacity of
100,000 bpd for the production of
basic petrochemicals such as pro-
pylene and xylene.
Petroecuador is the leader in
fuel-oil sales in Ecuador and man-
ages the Trans-Ecuadorian Pipeline
System (SOTE). It is planning to
construct a connection to Colombia
to complement the link already in
place to Peru for when production
begins in the country’s south.
CORPORATE PROFILE
Ecuador’s New Energy Promise
Operaciones Río Napo CEM is a joint venture
between Petroecuador and Venezuela’s PDVSA, which holds 30% of the com-
pany. Created in July 2008, its goal is to develop interests at every level of the
industry, but the company’s primary mission is to increase production at the
Sacha field in the northeastern province of Orellana by leveraging the ongoing
exploration of deposits and reserves and the introduction of new technology.
Sacha contains proven reserves of 400 million barrels, according to Río Napo
General Manager Patricio Román, and has the potential to reach more than 500
million barrels, making it the country’s highest-producing field. Current output
stands at 61,400 bpd, with a goal of reaching 70,000 by the end of 2012.
Next year, Río Napo aims to introduce more-advanced processes and new
techniques to improve its production and
increase reserves. The goal is to propel itself
into the upper echelons of the industry with its
quality product and to explore export oppor-
tunities to Asia and Russia, says Román.
PROMOTION 9
CORPORATE PROFILE
SCHLUMBERGER: A Proud Past and a Bright Future
Schlumberger is a global leader
in technology, project management
and information solutions for oil and
gas clients, and is active in 85 coun-
tries, employing 115,000 people
worldwide. The company invested
$1.1 billion in R&D last year, and
maintains a network of six research
laboratories in the United States, the
United Kingdom, Russia, Norway,
Saudi Arabia and Brazil.
Schlumberger delivers the indus-
try’s widest range of products and
services, including seismic and
geophysical services, wireline log-
ging, drilling services, well services
such as cementing and stimula-
tion, testing and subsea, coiled
tubing and slickline, interpreta-
tion and consultancy, specialized
software solutions and integrated
project management.
Present in Ecuador since
November 1934, when it ran the
country’s first electrical log on
Ancon’s Doña Santa Elena field,
Schlumberger has played an active
role in many of the Ecuadorean oil
industry’s successes. For more than
seven decades, it has been instru-
mental in helping domestic and
international oil companies achieve
their goals.
Schlumberger has expanded its
portfolio in Ecuador, keeping pace
with the latest technology, to ensure
that it exceeds clients’ requirements.
The company believes in shar-
ing know-how and has established
relationships with local experts and
universities, benefiting multiple gen-
erations of Ecuadorean professionals.
The company also collaborates
with educators in underprivileged
areas to inspire Ecuador’s youth
to study science and technology.
The Schlumberger Excellence in
Educational Development (SEED)
nonprofit program is currently
active in 15 Ecuadorean schools.
Serving industry and community
alike, Schlumberger remains com-
mitted to advancing Ecuador’s
interests over the long term.
Exploration success rates make good on nation’s promise and unexplored fields offer growth potential
While international oil companies
considering taking part in Ecuador’s
Southeastern Round may be under the
impression that doing business here
is a risky or uncertain proposition, the
success rate that producers already
working in the country are enjoying
should make them think again.
Looking at some of the compel-
ling developments in the sector,
Schlumberger’s Guillermo Jalfin, the
vice president of Business Devel-
opment and New Ventures Latin
America, commented on Ecuador’s
many opportunities: “There’s the drive
to increase national oil production,
which is reversing the trend of declin-
ing production in mature fields; the
will to encourage overseas investment
and create a new business model; and
the access to new technologies as a
requirement for participating in the
process.”
That’s not just talk. The Paris-based
oil services company is putting its
money where its mouth is, committing
to investments of nearly $1.3 billion over
the next five years under the terms of a
production-incentive contract signed in
February with Petroecuador. It will drill
72 development wells and 107 work-
overs, and expects to raise production
from 43,000 bpd to 60,000 bpd.
David Martin, an oil industry leader
and the CEO of Gente Oil Global,
agrees: “Exploration risk is a lot dif-
ferent than it was years ago. It has
been cut substantially by new tech-
nologies. There are no ‘dry’ structures
in Ecuador. They may not be easy to
exploit, as these fields are in solid
jungle and there is no infrastructure.
But the technology is there; one
just has to be careful to protect the
environment.”
Chinese oil companies, which have
been active in the local market for
less than a decade, provide a great
example of how even newcomers
can prosper in Ecuador, according to
Peng Tao, the economic attaché at
the Chinese Embassy in Quito. She
believes the two nations’ complemen-
tary advantages in terms of financing,
technology, resources and markets
will lead to win-win outcomes.
“Andes Petroleum Ecuador and
PetroOriental—a joint venture between
two Chinese oil companies, China
National Petroleum Corporation (CNPC)
and China Petrochemical Corporation
(SINOPEC)—operates the Tarapoa and
PetroOriental blocks,” Peng says. “The
successful application of production and
exploration techniques has maintained
production levels for the last seven
years.”
EXPERTS EXPRESS CONFIDENCE IN ECUADOR’S PROSPECTS