CAPITAL: QUITO
MONETARY UNIT: SUCRE/US DOLLAR
REFINING CAPACITY: 176,000 B/CD
OIL PRODUCTION: 390,300 B/D
OIL RESERVES: 2.1 BILLION BBL
GAS RESERVES: 3.7 TCF

Ecuador was experiencing difficult economic and political conditions in 2000, and the possibility of an increase in oil revenues seemed the best hope for improvement.

Officials introduced the US dollar with hopes of phasing out the sucre. Other short-term issues included hikes in imports of oil products and LPG, relations with Colombia and Venezuela, whether to authorize a second crude oil pipeline, and possibly shutting down a refinery.

Upstream developments

Early in the year the government echoed Perez Companc of Argentina's estimate that an Oriente oil discovery on Block 31 holds 500 million bbl of reserves. The block is far inland, near the Colombian and Peruvian borders.

The discovery well flowed 5,000 b/d, and three zones remained to be tested.

Ecuador also said Cayman Oil Co. discovered 55 million bbl of reserves of 28° and 33° gravity crude at the Palo Azul well on southern Block 18 some distance west of Sacha oil field.

Crestar Energy Inc., Calgary, bought CMS Oil & Gas Co.'s Ecuadorian subsidiary that held a 14% interest in 1,240 sq mile Block 16, operated by Repsol-YPF SA. Gulf Canada Resources Ltd. then purchased Crestar.

Crestar said fields on Block 16, in which Overseas Petroleum and Investment Corp. and Murphy Ecuador Oil Co. participate, can produce 50,000 b/d but were constrained by pipeline access to 40,000 b/d of 16° gravity oil. Gross reserves were 305 million bbl on the block.

Alberta Energy Co. Ltd., Calgary, was to earn a 40% interest in Occidental Petroleum Corp.'s operations on Block 15. AEC would assume certain capital costs through 2004. Oxy would remain operator.

Occidental said that it was pursuing a number of attractive growth opportunities in Ecuador and that the deal would self-fund its capital program while freeing investment capital for new projects.

Oxy was in extensive exploration on 494,000-acre Block 15 and moving forward with plans for the development of its 115 million bbl, 21° gravity Eden-Yuturi oil discovery. Gross production in Block 15 was 30,000 b/d with Oxy's share prior to the farmout at 21,000 b/d. The established fields are Jivino, Laguna, Napo, Indillana, Itaya, and Limoncocha fields.

Petroecuador was to tender contracts for 3D seismic exploration to verify possible reserves totaling 4.1 billion bbl over Petroproduccion's Sacha, Libertador, and Shushufindi fields. Acquisition was to be completed by mid-2001.

First gas utilization

Ecuador, which flares associated gas because the country has no significant gas markets, could soon get its first significant gas project.

Early results were positive in a four-well development drilling program at Amistad gas field in the Gulf of Guayaquil. The Samedan-EDC unit of Noble Affiliates Inc., Ardmore, Okla., set a platform and began drilling for gas at 10,000-11,000 ft. It planned to ship the gas through a 40-mile pipeline to a power plant to be built at Machala.

Noble expected to see "significant upward booking" of gas reserves during 2001. Noble booked 87.5 bcf of gas reserves associated with Amistad field in 1999.

The field was to supply about 13 bcf/year for 20 years beginning in 2002. Noble said its 2D and 3D seismic data indicate other structures with potential on the block, but the plan was to develop Amistad before exploring the other possibilities.

Processing activity

Citing studies showed it to be cheaper to import products than refine them locally, the government raised the possibility that one or more of Ecuador's refineries might close.

The plants are at La Libertad, Shushufindi, and Esmeralda.

Howeveer, Petroecuador was considering alternatives such as refining abroad, exchanging crude for clean products, exporting the country's crude production, and buying the products it needs on the international market.

Later in the year Ecuador and Venezuelan leaders processing and distribution possibilities under which Ecuadorian crude would be processed at Venezuelan refineries.

Transportation

Companies have been competing to build a second pipeline across the Andes from Ecuador's Oriente oil producing province. The existing 311-mile Trans-Ecuadorian system as at its capacity of nearly 400,000 b/d. A project might have been authorized in 2000, but Ecuador's president deferred to his energy minister who hoped to negotiate a contract in 2001.

Some have questioned that enough excess production exists to support new lines, which are sized at 425,000-450,000 b/d each. They said heavy oil output is about 150,000 b/d and that Petroecuador's output has been falling since 1995 and it could not produce that much more light crude.

Ecuador and Peru authorized joint studies aimed at connecting their oil pipelines in far eastern Ecuador and northern Peru. They were to study interconnecting trunklines or directly linking oil fields near the countries' common border with spurs.

Funds for the study came from the Peru-Canada cooperation program.

One option was for Ecuador to use excess pipeline capacity to move oil to Bayovar on Peru's northern coast for shipment to Guayaquil.