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Ecuador seeking $1.4bn oil-backed loan from China

Presidencia de la República del Ecuador

President of Ecuador LeniŽn Moreno with president of China Xi Jinping

By Patricia Garip / Platts

Petroleumworld 07 15 2020

Ecuador's austerity-minded government is in discussions with China to secure a new loan backed by oil sales.

The fresh loan of at least $1.4bn would be secured by some 50mn bl of crude sales under a long-term arrangement that replicates a series of oil-backed debt contracts that state-owned PetroEcuador is still servicing with supply to Chinese state-owned PetroChina and Unipec, as well as Thailand's state-controlled PTT.

In anticipation of the new loan, President Lenin Moreno issued a decree on 9 July that reforms the planning and public financing code to mandate a comprehensive analysis of any new public credit.

The debt talks were confirmed by PetroEcuador. The economy and finance ministry referred inquiries to the non-renewable natural resources (oil) ministry, which indicated that it would not comment until a transaction is finalized.

The talks follow the government's restructuring of debt with a group of bondholders, and the unveiling of economic reforms, including a planned auction for PetroEcuador's 110,000 b/d Esmeraldas refinery and the removal of most motor fuel subsidies.

On 11 July Ecuador implemented the first monthly fuel price adjustments under a new market-based pricing mechanism laid out in decree 1054 issued in May.

For the period of 11 July to 10 August, state-owned PetroEcuador's published a refinery gate price of $1.61/gallon for 92-octane "super" gasoline. The oil ministry issued a suggested retail price of $2.24/gallon for the grade.

For 87-octane "extra" gasoline and Ecopais, which is "extra" gasoline with 5pc ethanol, the wholesale price from PetroEcuador is $1.58/gallon, with the maximum retail price set at $1.75/gallon.

Diesel at the refinery gate is $0.91/gallon, with a retail cap of $1.04/gallon.

The new pricing system establishes a 5pc band around the future price of WTI crude, with monthly reviews. When the new policy was first adopted, retail fuel prices immediately fell as a result of the sharp decline in international oil prices. LPG prices remain frozen.

Ecuador, which left Opec in January as a belt-tightening measure, has been particularly hard hit by the Covid-19 pandemic combined with the March collapse in oil prices and a series of mudslides and erosion that ruptured oil export pipelines in April.

By Patricia Garip from S&P Platts
07 14 2020



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