[News] Ecuador made pre-sales of crude beyond what it could meet; in 2022 it will have a red balance

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Petroecuador sees a shortage of 7.51 million for next year. Renegotiation in deliveries is plan A to meet commitments.

Ecuador prevented more oil than it could deliver and thus in 2022 it will present problems to fulfill its commitments at the international level. According to information from the companies Petroecuador and Petroamazonas, now merged, the crude delivery commitments are of at least three types. In the first place are the pre-sales with Asian countries that in 2022 reach 75.2 million barrels; the contract with Shell (8.64 million barrels) and spot sales (to the highest bidder) amounting to 8.48 million. In total 92.32 million barrels are required in 2022.

However, the exportable supply (the crude that is available for sale) would be only 84.81 million barrels that same year. This produces a shortage of 7.51 million barrels. We will have a red balance.

 

YEAR                                                 2021    2022    2023    2024
a) DISPONIBILIDAD EXPORTABLE    95,16    84,81    89,53    87,58
b) COMPROMISOS                          91,97    92,32    60,79    26,4
ASIÁTICAS                                        81,02    75,2    43,2    17,64
SHELL                                               1,44    8,64    8,64    0
SPOT                                                9,52    8,48    8,95    8,76
OUTCOME (a-b)                             3,19    -7,51    28,74    61,18

 

The oil authorities are already looking for solutions to this complex scenario. According to Fernando Santos Alvite, advisor to the Minister of Energy, René Ortiz, there are several ways to avoid non-compliance.

Plan A is to renegotiate crude deliveries with the Asian companies Petrochina, Unipec and Petrotailandia; This means proposing to extend the delivery period. He explained, for example, that Petrotailandia, with which there are commitments in 2022 that reach 30.78 million barrels and is very willing to talk. However, Petrochina is the largest oil creditor with 41.34 million barrels.

Santos assures that in the non-consensual case that deliveries could not be renegotiated, then there is a segment of crude destined for spot sales that could perhaps be used. This scenario would not be recommended, since according to the law this type of sales must be made taking at least 10% of the total exportable supply. According to Santos, it is important to comply with the legal percentages, and he recalled that the contract with Shell establishes that the price of these deliveries is set based on the spot price.

Despite this, last October it was known of the intention to suspend for two years (2021 and 2022) spot sales. The proposal came at that time from the Vice Minister of Hydrocarbons, María Eliza Soledispa. The intention at that time seemed to be to give more space to the exportable supply to access a new credit, tied to oil, with China.

Meanwhile, Santos also commented that an immediate increase in production is not feasible. He explained that one of the options to improve production is precisely the exploitation of the Ishpingo Field of the ITT Block, but this is delayed due to lack of money for the construction of the road that serves to transport the towers.

When Santos was asked whether the country would be forced in 2022 to buy oil from another country to fulfill its commitments, he said that "I don't think we will get there." He also explained that for 2023 and 2024 sales commitments are already falling significantly.

For the oil analyst Miguel Robalino, in view of the situation of the lack of crude oil, the Government urgently needs to renegotiate the long-term contracts for the oil pre-sale, both with Petrochina and with Petrotailandia. He explained that if there were no crude oil with which to respond to the contracts, then the Government would have the option of allocating part of the crude that goes to the refineries for the fulfillment of those commitments, especially taking into account that the contracts have clauses of fines in case of non-compliance. But it would also have to buy crude, for refineries, or even buy derivatives to supply the domestic market.

Ecuador by 2021 would produce 172 million barrels a year, while in 2022 it could drop to 160 million. Of this total, 55.3% and 47.5%, respectively, represents the crude that is destined for the Esmeraldas, La Libertad and Shushufindi refineries. The rest is what is sold abroad, that is, the exportable supply.