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Petroamazonas, Petroecuador to Merge Upstream Operation Soon

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QUITO, Ecuador - Ecuadorean state-owned oil company Petroamazonas has started to take over the exploration and production activities as well as the natural gas operations of state-owned firm Petroecuador, the country's deputy minister of hydrocarbons, Ramiro Cazar, said Thursday.

According to Mr. Cazar, the decree to merge parts of the companies was signed by President Rafael Correa earlier this month and will come into full effect after its publication in Ecuador's official gazette, in the coming days.

With the merger, Petroamazonas will operate 14 oil blocks, including the Amistad gas field in Guayaquil Gulf. Petroecuador will continue to operate its commercialization, refining and transportation activities.

Oswaldo Madrid, Petroamazonas's general manager, said that the company currently has assets of over $2.2 billion. It could have a study out next month on Petroecuador's exploration and production assets.

"We are ready to take over all state oil exploration and production," said Mr. Madrid. "We, Petroamazonas, have the ability to do this."

Marco Calvopina, general manager of Petroecuador, said that Petroecuador's remaining oil reserves total about 1.52 billion barrels of crude.

The merger between Petroamazonas and Petroecuador is part of an overhaul that seeks to reduce operating costs, boost production, and improve efficiency and profitability in the state oil industry.

Currently, state-owned companies produce 373,000 barrels of crude oil per day, which is 73% of the Ecuador's total output. Private companies produce 136,000 barrels per day.

Petroamazonas produces 150,000 barrels per day, while Petroecuador produces 158,000 barrels per day and Rio Napo has 65,000 barrels per day.

The merged company will maintain the Rio Napo joint venture with Venezuela's PDVSA for the Sacha oil field. Rio Napo is a joint venture that is 70% owned by Petroecuador and 30% by PDVSA.

Mr. Cazar said that by 2014, Ecuador expects to produce about 546,000 barrels per day, a 7% increase from the current 509,000 barrels per day.

Petroamazonas was created to operate the oil fields formerly owned by Occidental Petroleum Co. The fields were seized in May 2006 after various disputes with the California-based company.

Additionally, Petroamazonas operates fields formerly run by Anglo-French company Perenco Corp. and by Brazilian oil company Petroleo Brasileiro SA, and also operates the Panacocha oil field.

Copyright (c) 2012 Dow Jones & Company, Inc.

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