Ecuador to boost oil output in second half 2017
Under the Opec and non-Opec price stabilization accord forged in December 2016, Ecuador pledged to limit production to some 522,000 b/d for six months starting in January, down from an average 548,000 b/d in 2016.
Opec and 11 non-Opec producers agreed in December to cut overall production by a combined 1.8mn b/d in the first half of 2017.
Ecuador's plan to increase production later this year, just a month after the collective production restraints started kicking in, seems to suggest little appetite for a possible extension of the existing six-month pact. But Ecuador's foreign minister Guillaume Long has said Quito fully supports the accord and would comply with whatever Opec decides going forward.
Quito hopes to offset revenue losses from the production cuts by selling its Oriente and Napo grades at an average of \\$42/bl in 2017, some 18pc above the 2016 average export price, according to the central bank.
"Before the agreement we were trying to surpass the 550,000 b/d production benchmark," Pesantes said.
A planned production increase in the second semester will come mainly from Ecuador's state-owned PetroAmazonas's ITT heavy crude complex and enhanced recovery at the company's mature fields, such as the 67,000 b/d Auca, according to Pesantes.
PetroAmazonas started developing the Ishpingo-Tambococha-Tiputini (ITT) heavy crude complex in September 2016. It holds an estimated 1.67bn bl of 14?-15.5?API reserves.
Output at Tiputini, the first of the three ITT fields to be tapped, started at 23,000 b/d in September and closed January at some 32,400 b/d, almost flat from December, when the field was originally scheduled to reach 40,000 b/d.
Some of the incremental output planned for later this year could also come from Tambococha, which was originally scheduled for launch by June 2017.
Besides Auca, other mature fields such as 70,000 b/d Sacha and 24,000 b/d Cuyabeno, as well as new exploration acreage in southeastern Ecuador close to the Peruvian border, are not likely to contribute to the near-term production increase, according to Pesantes.
Cash-strapped PetroAmazonas is still searching for partners to increase investment and output at Sacha and Cuyabeno after two separate negotiations failed.
An agreement signed on 21 November between PetroAmazonas and China's state-run China Energy Reserve and chemical company CERCG for Sacha was abandoned on 4 January, according to official documents seen by Argus. A separate agreement with Vancouver-based First Merit Group for Cuyabeno also soured in August, when the contract's signature ceremony was cancelled.
"We are in conversations with several parties (to find partners for Sacha and Cuyabeno) but the process is a bit stalled at the moment," Pesantes said.
Ecuador plans to reduce output by 10,000 b/d in January, 15,000 b/d in February and 20,000 b/d in March and April. The effort will then ease to 15,000 b/d in May and 10,000 b/d in June, for a combined 2.7mn bl in the January-June period, according to a Citigroup-drafted prospectus for a recent \\$1bn bond issuance by Ecuador.
The prospectus warns that "any reduction in crude oil production or export activities that could occur as a result of the foregoing changes in Opec's production quotas or a decline in the prices of crude oil and refined petroleum products for a substantial period of time may materially adversely affect Ecuador's revenues and the performance of its economy."