Gutierrez: Output Not Enough to Fill OCP

Ecuador is not producing enough oil to fill the new US$1.3bn OCP heavy crude pipeline due to start operations in October, President Lucio Gutierrez said in a radio interview, local newspapers reported.

"They built the OCP saying that the companies that were building it would produce enough crude to fill the pipeline, but the fields operated by private companies are declining at a faster rate than [state oil company] Petroecuador's fields," a Petroecuador source told BNamericas. "After all the seismic studies they have done on these fields, the only one that might be able to increase production before the pipeline starts up is Occidental and maybe Repsol YPF, but even then they will only have about 250,000 barrels a day [b/d]," the source added. OCP's vice-president Edward Gilbert said in May that the OCP would initially transport crude at about 50% of its 390,000b/d reserve capacity.

The three major companies involved in the OCP consortium - Canada's Encana, US-based Occidental and Spain's Repsol YPF - are all ready to start shipping crude when the pipeline starts up, but will not initially ship their full capacity. Fellow consortium members Agip, Perenco and Perez Companc have signed reserve capacity on the pipeline but are not prepared to start shipping crude by October.

Private companies are urging Petroecuador to exercise its right to ship 40,000b/d through the pipeline, but "why would we pay US$2 a barrel [for transport] when we could pay 30 cents a barrel using our own pipeline - it doesn't make sense," the source said.

Ecuador's shortfall in production could have been avoided if the government had awarded a private company the contract for the Ishpingo-Tiputini-Tambococha oil fields, known as the Tiputini project, two years ago, the source said. Tiputini has reserves of some 1.2 billion barrels, about a quarter of Ecuador's total reserves, and could produce about 150,000b/d, the source said. Tiputini project manager Mauro Davila says that Petroecuador's board will decide by the end of July what type of participation contract to use for the Tiputini project, and will award the contract by the end of the year.

About Business News Americas: Business News Americas is a multilingual news and business information service that covers the most important original stories in 11 different business sectors throughout Latin America everyday. Visit BNamericas to access our real-time news reports, 7-year archive, Fact File company database, and latest research reports.

Click here for a Free two week trial to our Latin America Oil & Gas information service.