New Oil Blocks to be Actioned in Ecuador’s Amazon Region

Ecuador will auction contracts for new Amazon oil blocks believed to contain as much as 1.6 billion barrels, Non-Renewable Natural Resources Minister Wilson Pastor said Friday.

Three of the 16 blocks will be directly awarded to foreign state oil companies that will partner with Ecuadorian state oil firm Petroamazonas.

The minister said the winning bidders are expected to invest around $1.2 billion in the blocks.

The interested companies include Spain’s Repsol. Italy’s Eni and China’s Andes Petroleum and Sinopec, as well as Peruvian, Colombian, Mexican, Turkish, Vietnamese and Indonesian oil firms.

Contracts for a total of 21 blocks were initially to be awarded, but that number was reduced to 16 and the start of the bidding process was pushed back from October to November to allow time to work out agreements with communities that live in those areas.

Once the bidding process is launched, interested companies will have until May 30, 2013, to prepare their bids. Ecuador’s government will then evaluate them with a view to signing new contracts next September.

Petroamazonas will be the majority partner and operator of blocks 57 and 86 on the border with Peru and its priority is to partner with state oil firm Petroperu, although Colombia’s Ecopetrol also has expressed interest, Pastor said.

Ecuador will sign service agreements with the winning bidders, which will be paid a fee per barrel of oil produced.

Since these operations entail greater risk, the service fees are up to 25 percent higher than those offered in contracts for blocks in other regions, Pastor said.

He also noted that the fee will not be fixed, but instead could be reduced if production at a given block rises or if more reserves are discovered.

Among the blocks not included in the bidding is one located on lands occupied by the Kichwa Indian community, which successfully sued Ecuador before the Inter-American Court of Human Rights.

That San Jose, Costa Rica-based court ruled this year that Quito illegally granted an oil concession on the Indians’ lands in the early 1990s without consulting them and ordered the government to consult with indigenous communities prior to projects that affect their lands.

Pastor said consultations with communities to be affected by the oil projects were begun in August and will end in the “coming weeks.”

The minister said the government has signed agreements with some of those communities establishing the social investments to be carried out by companies that will develop the blocks, but he acknowledged that “there is resistance in other cases.”

Ecuador, the smallest member of OPEC, produces some 500,000 barrels of crude per day, with state oil firms accounting for 60 percent of the total and the rest corresponding to private operators who accepted the fee-based service contracts in a 2010 sector reorganization.

Ecuador’s oil mainly comes from the northern part of its Amazon region and it is transported to the Pacific coast via the SOTE and OCP pipelines.

Oil is Ecuador’s main export product and also a key source of government revenue.

Published in Notitas de Noticias

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