By Alberto Araujo/Argus
QUITO
EnergiesNet.com 02 09 2022
Ecuador plans to issue new regulations in the coming weeks to migrate about 20 existing fee-based service agreements with foreign and domestic oil companies to production-sharing contracts, energy minister Juan Carlos Bermeo told Argus.
Currently, the ministry of energy pays fees ranging from $15-$40/bl to around 15 domestic and foreign oil producers. The fee varies according to the international oil price, reserves, age of the field and other terms of the contract.
From 2009 to 2012 former president Rafael Correa forced private oil producers to switch their agreements from production-sharing to fee-based service contracts. Although these kinds of contracts incentivized production increases when oil prices rose, the government stopped paying the producers on time when prices started to fall in 2014. These late payments became debts the government owed ranging from $300mn-$1bn annually.
To alleviate the problem and motivate companies to increase production, the current government of President Guillermo Lasso said last year it would renegotiate the agreements back to the production-sharing model voluntary.
Bermeo said several private producers are interested in the renegotiation, but the process will not start until Lasso signs a new regulation that establishes the procedures for the agreements. The signing will take place in the next few weeks.
One company interested in changing to the production-sharing model is Orion Energy, which since 2012 has operated the small fields of Eno-Ron and Ocano Peña Blanca in Sucumbios province. The fields produce a combined 5,000 b/d. The company has been paid an average fee of $36/bl extracted in the last year.
Orion chief executive Fernando Emanuel said a production-sharing agreement will allow it to eliminate the late payments from the government during periods of low prices and attract investors and financing more easily.
“With the current contract, we have experienced periods of six consecutive months without any payment, and it has complicated our operation,” Emanuel said. “The new agreement will reduce our risk when asking for financing from banks or new investors.”
The production-sharing contract will incentivize Orion to increase production by 50pc and make additional investments of around $100mn over the next three years, he said.
Gente Oil, operator of the Singue field in Sucumbios province, said it may also be interested a contract conversion. The company produced about 3,600 b/d from the field and received about $28/bl since 2012.
Ecuador hopes to increase production to 580,000 b/d in 2022, including storage withdrawals and internal transfers, a 22pc increase over 2021 volumes. Petroecuador accounts for 80pc of output.
argusmedia.com 02 07 2022
