ECUADOR: President Rafael Correa signs billion dollar deals with foreign firms in a bid to boost oil output

Record ID: 344110

  • Title: ECUADOR: President Rafael Correa signs billion dollar deals with foreign firms in a bid to boost oil output
  • Date: 2nd February 2012
  • Summary: LAGO AGRIO, ECUADOR (FILE) (ORIGINALLY 4:3) (REUTERS) VARIOUS OF OIL WELLS VARIOUS OF OIL FIELDS
  • Embargoed: 17th February 2012 12:00
  • Keywords:
  • Location: Ecuador
  • Country: Ecuador
  • Topics: Domestic Politics,Energy
  • Reuters ID: LVA7JWG31UVUDVUN7CU7Q3TVYR3A
  • Story Text: Ecuador's state oil company, Petroecuador, is set to sign long-term deals with several foreign firms for investments worth $1.7 billion dollars USD to increase oil output at two mature oil fields, President Rafael Correa said on Tuesday (January 31).
    After taking office in 2007, Correa introduced reforms to increase state revenue from the oil industry, which led some companies to freeze investments.
    However, prompted by high oil prices, companies made some investments last year, which allowed OPEC-member Ecuador to raise oil output slightly.
    "The contracts have been designed in such a way that the companies will only receive payment if they truly manage to increase the productivity. Increasing production will be paid. If the production increase is zero, in other words, it does not go past the base line at which it is already operating, the payment for the company is zero. Everything is based on results." Correa said.
    The 15-year oil service contracts are with Schlumberger <SLB.N>, the world's largest oilfield services company, for the Shushufindi field, and a consortium led by Argentina's Tecpetrol at the smaller El Libertador field, Petroecuador said earlier.
    Petroecuador's general manager Marco Calvopina last week said the initial investment over the next five years will be small, but the companies would spend up to $1.7 billion in total if their oil recovery enhancement techniques prove successful.
    Shushufindi-Aguarico currently produces around 45,000 barrels of crude per day (bpd) and its output could peak at 60,000 bpd in the future. The investment in Libertador-Atacapi is aimed at keeping output steady at around 16,000 bpd.
    Schlumberger could invest up to $1.3 billion in Shushufindi, while Tecpetrol - in consortium with Ecuador's Sertecpet, Toronto-listed Canacol and Schlumberger - would invest some $385 million in Libertador. The fields have been producing oil since the 1970s.
    Correa looked to ease concerns saying the deal was necessary because the country lacked risk capital needed for the investment and technology.
    "Let the risk be for those who have the capital, not the Ecuadorean people who need guarantees on every invested dollar," said Correa, whose leftist "citizens' revolution" has accused foreign firms of mistreating developing countries like Ecuador.
    He added that Petroecuador will remain in charge of the fields' operations.
    Correa has had tumultuous relations with foreign investors, revising oil contracts to better favor the government and defaulting on the nation's debt.
    Petroecuador expects oil production this year to rise 10 percent from 2011 to 60 million barrels, the company said in December.
    Ecuador currently produces around 500,000 bpd and it is OPEC's smallest member.
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