-Force majeure on all oil contracts ends after 25 days
-Economic blow from production shortfall seen at $533 million

By Stephan Kueffner/Bloomberg

QUITO
EnergiesNet.com 01 07 2022

Ecuador lifted a three-week force majeure on all oil contracts as the country’s two pipelines that transport crude across the Andes resumed operations following a flare-up in riverbed erosion, allowing Amazon territory fields to restart production.

Ecuador’s output has risen to almost 435,000 barrels a day since the Trans-Ecuadorian Oil Pipeline System — owned by state-run Petroecuador — and the privately-held Heavy Crude Pipeline went back online ahead of the New Year. Rescheduled exports of Oriente and Napo crude are to resume shortly, the Energy Ministry said in a statement late Wednesday. The government estimates a short-term income loss of $533 million from the incident.

River erosion near critical pipeline infrastructure has accelerated since the Coca-Codo Sinclair hydro-electric power plant, Ecuador’s biggest, was inaugurated in late 2016. A landslide along the river in April 2020 severed both pipelines, triggering spills. 

With the pipelines forced offline to once again build bypasses, fields had to shut down as storage tanks filled up.  

Ecuador’s third force majeure on oil contracts since the two pipelines snapped in 2020 dealt a blow to President Guillermo Lasso, who aims to overcome years of stagnant production in the former OPEC member and more than double output to near 1 million barrels a day.  

The clause, which is invoked to remove liability from failing to honor contracts in the event of disasters, went into effect on Dec. 12. 

International agencies, including the U.S. Army Corps of Engineers, are working to help Ecuador find a solution to the damage from the aggressive erosion.

By Stephan Kueffner from Bloomberg
bloomberg.com 01 07 2022