PetroEcuador in talks with PTT for oil-backed loan

OREANDA-NEWS. Ecuador's state-owned PetroEcuador is in talks with Thailand's state-controlled PTT to secure a \$500mn oil-backed loan to help finance its investment program.

PetroEcuador hopes to close the deal this month, PetroEcuador and oil ministry officials told Argus.

A high-level PTT delegation visited PetroEcuador's headquarters in Quito in the third week of April, a PetroEcuador official says.

PTT, which has no operations in Ecuador, could not be reached for comment.

After oil prices fell sharply last year, PetroEcuador has been seeking additional alternative funding sources to help finance its 2015 investments.

The company's budget was almost halved to \$637mn this year, from \$1.17bn in 2014. Refining and transportation projects alone will require some \$530mn. Operating expenses have been set at \$1.1bn, mirroring 2014 figures.

The transaction would help to expand Ecuador?s oil-backed obligations beyond Beijing. Since 2010 Ecuador has agreed to three separate loan agreements with China Development Bank totaling some \$5bn, "which are related to a multi-party contractual structure involving crude oil delivery contracts" with state-owned CNPC subsidiary PetroChina and state-owned Sinopec subsidiary Unipec, according to official documents seen by Argus.

In April 2013 PetroChina and PetroEcuador executed a \$2bn oil-for-credit agreement. In May 2014 the Ecuadorean firm and Unipec put into effect a similar \$2.4bn contract.

China became Ecuador's main source of credit after the Andean nation defaulted on \$3.2bn of its sovereign debt in 2008. Quito now has a \$5.2bn outstanding debt with China, which accounts for 65.8pc of Ecuador's total bilateral obligations and 27.6pc of Ecuador's total external debt, according to finance ministry data.

In January, during a visit to Beijing by Ecuador?s President Rafael Correa, Ecuador signed an MOU with China Development Bank over a \$1.5bn credit to be used to finance infrastructure and development projects.

Quito also signed a framework agreement with China's EximBank to provide up to \$5.3bn to finance a list of unspecified priority projects to be submitted by Ecuador. The new loans will help the government to offset lost income from shrinking oil prices.

In a separate Asian credit arrangement reached in October 2014, trading firm Noble Americas agreed to supply up to 50pc of PetroEcuador's imports of gasoline and diesel for five years under the terms of a \$1bn loan.

In line with other oil-exporting countries, Ecuador?s government has already reduced its 2015 budget by \$1.4bn to \$34.9bn and slashed its crude export price assumption from an original \$79.70/bl to a more conservative \$60/bl.