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Ecuador seeks oil private-sector contractors


QUITO, Mar 05, 2008

Ecuador’s state-owned oil company, PetroEcuador, wants private-sector contractors to develop four fields in the Amazon basin, backing off from plans to involve government-controlled majors from Asia and Latin America in the projects.

The tender for the fields is planned to go ahead towards the end of the first quarter, once environmental reviews and production estimates are completed. The company expects winning bidders to invest about $1bn (€660m, £500m) in the fields over the coming three years.

“There are three companies in the market that can do what we want”, including Franco-American group Schlumberger, and Halliburton and Baker Hughes of the US, said Fernando Zurita, the navy admiral at the helm of PetroEcuador since November, in a recent meeting with journalists.

Despite the six-year boom in the oil industry, Ecuador has failed to ramp up production. The industry contracted by 9 per cent on the year in 2007 after the previous administration stripped the US-based Occidental Petroleum of its concession and handed it to an ill-prepared PetroEcuador.

President Rafael Correa had previously said he wanted to enlist the likes of China’s Sinopec and Indonesia’s Pertamina in the fields. But the idea was dropped following a lengthy meeting with PetroEcuador officials in January, said Mr Zurita. “The plan to involve foreign state-owned oil companies will not go ahead.”

Officials at the oil services companies say they have been discussing the terms under which the tender could work in the Auca, Lago Agrio, Libertador and Shushufindi fields, which PetroEcuador says hold 2.4bn barrels of crude.

Regarding the mature fields, “PetroEcuador’s plans are very ambitious. It would be better to start with one field for a year and proceed from there”, said one official under condition of anonymity.

In a similar scheme, PetroEcuador officials on behalf of the government are negotiating changes in oil contracts with the six main private-sector companies. Rather than sharing in the revenue, the government wants to pay Chinese-owned Andes Petroleum, France’s Perenco, Spanish-Argentine Repsol-YPF, Brazilian Petrobras and US-owned City Oriente for extracting oil.

“Under current conditions, it is reasonable for the government to look for these terms,” said an official at a US oil company that no longer works in Ecuador.

The government is impatiently trying to change the rules of the game in order to benefit from the high oil price. Mr Correa recently gave the companies a deadline of Saturday to agree to new terms. If the companies preferred to leave, the government would compensate them for their investments made so far, he said.

If it manages to meet its production targets for the year, Ecuador will also need to wrestle a higher quota out of the Organisation of Petroleum Exporting Countries, which meets on Wednesday, or break its 520,000 barrels a day allotment just months after rejoining the cartel.

In December, Ecuador produced 531,700 barrels a day, and by the end of the year, PetroEcuador will have a daily output of about 306,000 barrels, including the former Occidental block’s targeted 107,000 barrels.

Occidental’s assets have been passed to PetroEcuador unit PetroAmazonas, maintaining its private-sector structure despite state ownership. That would allow it to retain both operating efficiency and qualified engineers, said Mr Zurita.

Despite flirting with the private sector, however, Mr Correa will not allow any private capital into the state oil sector, Mr Zurita said.

Stephan Kueffner from The Financial Times
The Financial Times 04 03 08

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