OREANDA-NEWS. Ecuador's state-owned PetroEcuador is struggling to resuscitate a small but strategic natural gas liquefaction plant that lies at the heart of Quito?s plan to wean local industry off of more costly oil products.

Ecuador?s experience highlights the way in which LNG has been making inroads across South America, penetrating industrial sectors through "virtual pipelines" using cryogenic trucks, and replacing oil products.

Aside from Brazil, Chile and Argentina, which import LNG from overseas, smaller countries like Ecuador and Bolivia have incorporated LNG to transport domestic gas in lieu of traditional pipelines. Bolivia is even seeking to export trucked LNG to neighboring Peru and Paraguay, once its roads are repaired.

But as the Bajo Alto case illustrates, the process has not always gone smoothly.

An oil ministry official told Argus that the 200 tonne per day Bajo Alto plant has been idle since the end of 2014 because of structural, mechanical and electric problems.

Official documents seen by Argus show that a sinking foundation, power outages and corrosion have damaged pipelines and key equipment.

The Bajo Alto predicament, which is only coming to light now, was one of the factors behind the 20 July replacement of PetroEcuador chief executive Marco Calvopina, the oil ministry official said.

Calvopina, who took office in 2011, was replaced by former PetroEcuador refining manager Carlos Pareja Yanuzzelli, who headed a major ongoing upgrade of the state-owned 110,000 b/d Esmeraldas refinery.

Construction and procurement of the $53.7mn Bajo Alto LNG system, which includes the liquefaction plant, 10 cryogenic trucks, a water treatment plant and communications infrastructure, was undertaken by Spanish engineering firm Ros Roca Indox Cryo Energy in 2009. In addition to the original engineering, procurement and construction contract for the plant, Ros Roca Indox Cryo Energy signed a separate $10.6mn 549-day contract with PetroEcuador in 2012 to operate and maintain the plant.

The plant, located in the coastal province of El Oro, started operating in November 2011, but according to a report from Ecuador's oil regulator ARCH obtained by Argus, operations never reached full capacity.

Gas is supplied to Bajo Alto from Ecuador's 56mn ft3/d (1.6mn m3/d) offshore Amistad field, which is operated by state-owned PetroAmazonas.

During the plant?s short-lived operations, the LNG was transported to an industrial park in Cuenca on cryogenic trucks, with the objective of replacing diesel and LPG at Ecuador's main ceramic manufacturing plants.

Bajo Alto, Ecuador's sole liquefaction facility, must be completely overhauled to recover operations, according to official documents.

In December 2013, ARCH appointed a commission to assess the damages and ensure that repairs were carried out. Australia-based engineering firm WorleyParsons was hired by PetroEcuador to provide technical support.

According to ARCH and PetroEcuador's documents, WorleyParsons pointed out that the first repair proposal submitted by Ros Roca Indox Cryo Energy did not comply with Ecuador?s construction standards and did not accurately address seismic risks at the plant site. A subsequent proposal also drew objections from WorleyParsons.

In April 2014, Ros Roca started to repair the plant but suspended the activity in July 2014. On 21 February 2015, "Indox personnel abandoned" the facility, the ARCH report says. On 11 March, PetroEcuador deemed Ros Roca Indox Cryo Energy in default on its contract and the company was blacklisted from Ecuador?s public-sector procurement system.

The regulator is carrying out an ongoing investigation.

A media relations representative for Ros Roca in Spain referred Argus to the company?s Ecuador office for comment. An executive who had been previously associated with the firm in Ecuador said the company is in the process of shutting down its local operations.