OREANDA-NEWS. June 27, 2018. Ecuador faces a series of obstacles in the path to reviving its stagnant oil sector in the second half of 2018.

State-owned PetroAmazonas is awaiting an environmental license to expand the development of its large heavy crude complex Ishpingo-Tambococha-Tiputini (ITT).

The company has already secured licenses to operate at Tambococha and Tiputini, which are in production, but is still awaiting a permit to drill at Ishpingo, ITT's largest field, PetroAmazonas chief executive Alex Galarraga told Argus.

PetroAmazonas aims to continue to increase production at ITT, where output rose from 53,600 b/d in May to 63,000 b/d in the first half of June, and should climb to 80,000 b/d by year's end, according to Galarraga.

Bur Ecuador's environment ministry must grant the Ishpingo permit by September to allow drilling at the field to begin by November. If the schedule is not met, PetroAmazonas will miss its production targets.

"We need to secure the permit by September, otherwise output at ITT will reach just 65,000 b/d by year's end. There is a work overload in the environment ministry which has kept it from accelerating the process," Galarraga says.

Ecuador's year-on-year output fell by 3pc to 515,496 b/d in May, slightly recovering to 516,518 b/d in the first half of June, but it remains short of the 540,000 b/d benchmark in Ecuador's 2018 budget and below its 522,000 b/d Opec quota.

PetroAmazonas is advancing the terms to contract an oil services firm to drill at Ishpingo. The firm plans to open a bidding round by late July and sign the contract by October.

"In Tiputini and Tambococha, we have drilled wells capable of producing 5,000-6,000 b/d, but in Ishpingo we believe there is potential for wells with 8,000-10,000 b/d capacity", Galarraga says.

ITT holds an estimated 1.7bn bl of 14°-15° API reserves.

Ecuador is targeting total production of 700,000 b/d by 2021. The goal hinges on the success of two new upstream rounds that will offer production-sharing contracts. These were abandoned in favor of service contracts under former president Rafael Correa, during a decade of aggressive state intervention.

Ecuador hoped to launch the Intracampos tender this month, featuring eight oil blocks in the northern Amazon oil district that will require $1bn in total exploration investment. Shakeups in the finance ministry, which has had three ministers since president Lenin Moreno took office in May 2017, has delayed the process.

To bring back the PSCs, a presidential decree regulating the contracts' terms must be issued, but first the government needed a report from the finance minister.