OREANDA-NEWS. March 27, 2017. Oil field services giant Schlumberger is pressing Ecuador to pay more than $1.1bn in overdue fees for oil production at the mature Shushufindi field where output has been cut to comply with an Opec-related cap.

The arrears are "an issue that is causing our company considerable financial stress," according to a letter sent by the firm's chief executive Paal Kibsgaard to outgoing president Rafael Correa, asking for his "personal help" to unblock the payments.

"In this regard, Ecuador now represents approximately 12pc of Schlumberger's accounts receivable balance at December 31, 2016," according to the 14 March letter seen by Argus.

Ecuador's finance minister Patricio Rivera told Argus that Quito is negotiating with Schlumberger, seeking an agreement to pay the debt, but declined to offer further details.

In the letter, Kibsgaard also complains that state-owned PetroAmazonas "has unilaterally decided to reduce production in the Shushufindi field by up to 10,000 b/d during February 2017, putting further pressure on our financial results on top of reducing financial proceeds to the Ecuadorian state".

In 2012, a consortium made up of Schlumberger and Argentina's Tecpetrol signed a 15-year enhanced recovery contract with PetroAmazonas for Shushufindi, where production jumped from 45,153 b/d to some 80,000 b/d by the end of 2016.

After that, PetroAmazonas reduced output at Shushufindi, one of Ecuador's largest and oldest fields, to comply with a six-month Opec and non-Opec price stabilization agreement engineered in December 2016. Production at the field dropped to 69,000 b/d in the first three weeks of March, according to PetroAmazonas data.

Tiny Opec member Ecuador pledged to limit total crude production to 522,000 b/d for six months starting in January, down from an average 548,000 b/d in 2016.

In addition to the Shushufindi partnership, in December 2015 PetroAmazonas and Schlumberger signed a 20-year contract to increase production at the 70,000 b/d Auca oil field in the Amazon district. Schlumberger pledged to spend $4.9bn over the next two decades to boost Auca production by 20,000 b/d. The company agreed to receive a $26/bl fee for existing and new production.

As part of the Auca agreement, the oil services firm made an initial $1bn capital outlay, and planned to spend an additional $2.1bn in the first nine years of the contract, including $1.1bn in 2016-19, and $1.8bn to cover operating costs at the field over the life of the contract.

"We have invested more than $3bn in rejuvenating both the Shushufindi and Auca fields, pushing production to new levels," Kibsgaard says in the letter.

Ecuador's debt "has resulted in us having to raise additional external borrowings to finance our operations and fulfill our various commitments to the state and other stakeholders," according to the same document.

A Schlumberger executive told Argus that PetroAmazonas stopped paying the fees some 18 months ago.

Schlumberger's chief executive warned Correa that, although it "fully understands that the low oil price and recent natural disaster have put considerable strain on Ecuador's economy," the situation is "obviously not sustainable in the long run."

PetroAmazonas is currently focusing on a plan to reduce capital expenditures and investments. Hard hit by the 2014 oil price collapse, "in 2016 drilling was almost null," chief executive Alex Galarraga said at a conference in Quito this week. Output did not fall mainly because of the development of the controversial ITT heavy crude block.