OPEC’s Decade of Turmoil Leaves Cartel Seeking a New Way Forward

(Bloomberg, Christopher Sell, 20.Sep.2018) — A global recession, both $140 and $30 oil, the U.S. shale revolution, a market-share war, and output cuts. OPEC’s 60-year history has rarely confronted a more challenging period than the past decade.

Now, instead of enjoying the higher prices resulting from 18 months of joint production cuts with a coalition of other major producers, the cartel faces new problems. A tweet-happy American president is ramping up geopolitical risk, renewed sanctions are hammering Iran’s exports, Venezuelan production is tanking as its economy collapses, and a political attack from Washington in the form of the NOPEC bill.

The alliance of exporters, spearheaded by Saudi Arabia and Russia, meets on Sunday in Algeria to consider its response to these challenges, while also taking the next steps to cement their alliance into 2019 and beyond. The Organization of Petroleum Exporting Countries response to crises over the past decade offer clues to the path it might take forward.

Global Crisis

Ten years ago, a banking crisis triggered a global economic downturn and a crash in oil prices as demand was obliterated. After peaking at a record $147.50 a barrel in July 2008, Brent crude fell as low $36.20 by year-end. Facing catastrophe, OPEC members put aside internal squabbles and agreed production cuts that were historic in their speed and scale — output fell 16 percent in just eight months. It worked, and prices began to recover in 2009 even as the world was mired in recession. After Chinese consumption came roaring back in 2010, the group was able to open its taps again as the cost of crude surged back toward $100.

Shale Boom

From 2011 onward, OPEC enjoyed years of riches and relative stability as oil traded near $100 a barrel, but a threat was emerging. A new generation of wildcatters from North Dakota to Texas was deploying innovative fracking technology to tap previously inaccessible shale oil deposits. OPEC was blind to the danger at first, then downplayed the risk even as some members raised the alarm — reasoning that shale was an expensive business and the cartel simply had to bide its time. By mid-2014, U.S. production had jumped more than 50 percent, crude prices were teetering on the brink and it was clear this new industry was reshaping the global market as OPEC stood by and watched.

Price War

By late 2014, there was a global oil glut, prices were collapsing and U.S. shale was showing no sign of slowing. Pressure increased on OPEC to respond as it had done in 2008 and cut output, but Saudi Arabia had a different plan. Driven by a combination of hubris and grievance — the kingdom thought it could easily vanquish high-cost shale and was sick of shouldering the burden of stabilizing prices alone — energy minister Ali Al-Naimi rejected requests from fellow members and opened the taps in a war for market share. At first it seemed to work — the price slump worsened and put immense financial pressure on OPEC, but also triggered a collapse in U.S. drilling and forced producers to close the taps.

Alliance with Russia

By mid-2016, Al-Naimi’s gambit looked like a failure. Crude still languished near $40 a barrel, putting some OPEC members on the brink of economic collapse. However, U.S. production was rising again after drillers made huge cost cuts and bloated crude stockpiles threatened to depress prices for years to come. A new Saudi minister, Khalid Al-Falih, was appointed and set about engineering a historic agreement including major producers from outside the group. By late 2016, he had secured the cooperation of 10 other nations, most importantly Russia, who agreed to remove 1.8 million barrels a day of supply from the market. Thanks to this deal, crude has staged a spectacular recovery from its bruising slump. In April, OPEC and its allies concluded they had achieved their goal of re-balancing the market and even higher prices beckoned.

U-Turn

If only it was that simple. OPEC’s moment of celebration faded fast as U.S. President Donald Trump threw a spanner in the oil market. Accusations on Twitter that the cartel was artificially inflating prices were followed by his renewal of sanctions on Iran’s exports and additional penalties that worsened the decline of Venezuela. Within a month, Saudi Arabia and Russia were signaling their intention to roll back the cuts, and in June they successfully pressured the rest of the group to agree. After 18 months of fairly harmonious supply restraint, some OPEC members were hastily reopening the taps, while others howled in protest from the sidelines.

What Next?

Where does OPEC turn now? Lessons from the group’s history point eastwards, toward a permanent partnership with Russia, said Harry Tchilinguirian, head of commodity strategy at BNP Paribas SA. It’s the most effective counterbalance to the shale revolution, which continues to reshape the market, he said.

“U.S. shale oil will be reaching the Atlantic Basin, and Asian markets alike, more regularly and in greater volumes as pipeline connections to the Gulf Coast and oil terminals are built or expanded,” Tchilinguirian said. This competitive challenge, along with demand dynamics that accompany the transition to cleaner energy, give OPEC an incentive to establish a permanent relationship with Russia and a growing number of non-members, he said.

Whether such an alliance would actually prove effective at managing the market in the long term is another matter, said Bob McNally, president of Rapidan Energy Group.

“The jury remains out as to whether this new Saudi-Russia led entity will succeed longer term at preventing future booms and busts or, like a number of other temporary ad-hoc cartels since oil’s earliest days, it will succumb to greed and indiscipline,” McNally said.

To contact the reporter on this story: Christopher Sell in London at csell1@bloomberg.net To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net Rakteem Katakey

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IEA Warns of Higher Oil Prices as Iran and Venezuela Losses Deepen

(Bloomberg, Grant Smith. 13.Sep.2018) — The International Energy Agency warned that oil prices could break out above $80 a barrel unless other producers act to offset deepening supply losses in Iran and Venezuela.

Iranian crude exports have fallen significantly before U.S. sanctions even take effect, the IEA said in a monthly report. The Middle Eastern nation will face further pressure in coming months and the economic crisis in Venezuela is pushing output there to the lowest in decades. It’s uncertain whether Saudi Arabia and other producers will fill any shortfall, or how far they’re able to, the agency said.

“Things are tightening up,” said the Paris-based IEA, which advises most major economies on energy policy. “If Venezuelan and Iranian exports do continue to fall, markets could tighten and oil prices could rise” unless there are offsetting production increases elsewhere, it said.

Oil climbed to a three-month high above $80 a barrel in London on Wednesday as fears of a supply crunch eclipsed concern about the risks to demand such as the U.S.-China trade dispute. While the Organization of Petroleum Exporting Countries and allies including Russia pledged to boost supply, the IEA said it remains to be seen how much will be delivered.

Saudi Arabia lifted output by 70,000 barrels a day to 10.42 million last month, but that remains “some distance from the 11 million barrels a day level that Saudi officials initially suggested was on the way,” the IEA said.

While the agency warned that “there is a risk to the 2019 outlook” for demand from challenges in emerging markets such as currency depreciation and trade disputes, it kept forecasts for consumption unchanged.

In the meantime, supply risks dominate. Oil inventories in developed economies are already below-average and will decline further in the fourth quarter, the IEA predicted.

Venezuela, which is pumping at just half the rate it managed in early 2016, could see its output slump another 19 percent to 1 million barrels a day this year as infrastructure deteriorates and workers flee, the agency predicted.

Iranian production has already fallen to the lowest since July 2016, at 3.63 million barrels a day, as buyers retreat ahead of U.S. sanctions that come into force on Nov. 4.

Although Russia, Saudi Arabia and other Gulf members of OPEC promised to bolster production by about 1 million barrels a day, the IEA remained cautious on whether the full amount would be delivered. It’s unclear how quickly OPEC’s spare capacity, which stands at about 2.7 million barrels a day, can be activated, it said.

“We are entering a very crucial period for the oil market,” which could push prices out of the $70-to-$80 a barrel range seen in the past few months, the IEA said.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net. To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net Rachel Graham.

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Venezuela’s Aug. 2018 Oil Output Continues Decline: OPEC MOMR

(Energy Analytics Institute, Jared Yamin, 12.Sep.2018) — Venezuela’s oil production seems on an unstoppable downward trend.

The OPEC country’s production of crude oil fell 2.9 percent to 1,235 thousand barrels per day (Mb/d) in August 2018 compared to 1,272 Mb/d in July 2018, according to data published in OPEC’s Monthly Oil Market Report, published on September 12 and citing data based on secondary sources.

Ecuador

Ecuador’s oil production rose slightly to 529 Mb/d in August 2018 compared to 525 Mb/d in July 2018, according to OPEC’s secondary sources data.

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Ecuador Holds Open Licensing Round for Eight Onshore Blocks

(World Oil, 12.Sep.2018) — Carlos Pérez Garcia, Minister of Energy and Non-renewable Resources in Ecuador has announced an open licensing round for eight blocks onshore Ecuador, in Sucumbíos Province.

These comprise: Araza Este, Changue, Iguana, Perico, Espejo, Pañayacu Norte, Charapa and Sahino. The blocks offered are all onshore, conventional opportunities, most with prospective sandstone reservoirs (one with a carbonate reservoir). All are low-risk exploratory blocks and are located close to established fields.

Ecuador is an under-explored country with high oil potential. Existing infrastructure and well-developed oil services industry presents an attractive opportunity to take hydrocarbons to market. The Ministry is offering a Participation Contract, that is equitable and competitive and allows companies to share production and book reserves.

The Intracampos round is an exciting new opportunity to increase investment in the country, as Ecuador offers opportunities for short medium and long-term investment, with future rounds planned.

The licensing round will be launched in Quito at the JW Marriott to invited parties only, on Sept. 11, and the latest date for submission of proposals will be January 2019.

Presentations and data rooms will also take place in Houston on Sept. 25-27, at the St Regis Hotel, Houston.

Data available for viewing includes 3D and 2D seismic, correlation wells (LAS, ASCII or Images) and production data from analog fields.

On the morning of Sept. 25, there will be an opportunity to hear presentations on the exploration opportunities, the contractual and fiscal terms, and the legal framework for upstream petroleum activities in Ecuador. Private data or meeting rooms will be available for two further days, with slots available to book.

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International Tribunal Rules for Chevron in Ongoing Ecuador Case

(OGJ, Nick Snow, 10.Sep.2018) — An international tribunal administered by the Permanent Court of Arbitration in The Hague found that a $9.5-billion judgment that Ecuador’s government lodged against Chevron Corp. in 2011 violated international treaties, investment agreements, and international law.

Ecuador breached its obligations under a 1995 settlement agreement that released Chevron subsidiary Texaco Petroleum Co. (TexPet) and its affiliates from the same public environmental claims on which the $9.5-billion Ecuadorian judgment was exclusively based, the Sept. 9 decision said.

In a ruling nearly 5 years earlier, the same tribunal said agreements Ecuador’s government signed in 1995 and 1998 released TexPet from environmental liability for land on which it once produced oil (OGJ Online, Sept. 18, 2013). That ruling upheld an important claim Chevron made in its years-long defense against a lawsuit claiming billions of dollars for environmental damage.

In its latest decision, the tribunal found that TexPet “spent approximately $40 million in environmental remediation and community development under the 1995 settlement agreement” carried out by a “well-known engineering firm specializing in environmental remediation” and that Ecuador in 1998 executed a final release agreement “certifying that TexPet had performed all of its obligations under the 1995 settlement agreement.”

The tribunal found “no cogent evidence” supporting Ecuador’s claim that TexPet failed to comply with the terms of the remediation plan approved by the government. To the contrary, the award recites sworn testimony of Ecuadorian officials that TexPet’s “technical work and environmental work was done well,” while Ecuador’s national oil company “during more than 3 decades, had done absolutely nothing” to address its own environmental remediation obligations in the area, even though Ecuador and its national oil company received 97.3% of the project’s oil production revenues.

“An esteemed international tribunal, including an arbitrator appointed by Ecuador, has unanimously confirmed that, following completion of an agreed environmental remediation program, Chevron was released by the Republic of Ecuador from the environmental claims that the fraudulent Ecuadorian judgment purports to address,” R. Hewitt Pate, Chevron vice-president and general counsel, said on Sept. 9.

“Following years of litigation, including visits to the former area of operations by the tribunal, the tribunal found that Ecuador violated the final release agreement that had certified the successful completion of TexPet’s remediation,” he said.

The tribunal also reached the same conclusion as US courts regarding the issue of judicial fraud, Pate said. “The tribunal found extensive evidence of fraud and corruption by members of the Ecuadorian judiciary acting in collusion with American and Ecuadorian lawyers,” he said.

“This award is consistent with rulings by courts in the US, Argentina, Brazil, Canada, and Gibraltar confirming that the Ecuadorian judgment is unenforceable in any country that respects the rule of law,” Pate said. “Indeed, the tribunal explicitly found that it would be contrary to international law for the courts of any other [nation] to recognize or enforce the fraudulent Ecuadorian judgment.”

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Esmeraldas Refinery Stoppage Delayed Until March 2019

(Energy Analytics Institute, Ian Silverman, 22.Aug.2018) – A scheduled 54-day stoppage at the Esmeraldas Refinery for the maintenance of the Non-Catalytic 1 and Catalytic 1 units will be postponed until March 2019.

The stoppage, originally planned to commence on August 16, 2018, was postponed by PetroEcuador as the contractor in charge of supplying pipes for the VH1 Furnace of the Vacuum Plant has experienced procurement delays, announced Ecuador’s Hydrocarbon Ministry in a statement on its website.

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Ecuador to Save $1 Bln With New Economic Measures

(Energy Analytics Institute, Ian Silverman, 21.Aug.2018) – The government of Ecuador aims to save about $1 billion annually with the implementation of new economic measures.

Ecuador’s President Lenín Moreno. Source: Efe

The new economic measures, which focus on reduction of bureaucracy, were announced on August 21, 2018 by Ecuador’s President Lenín Moreno and the country’s Economic and Finance Minister Richard Martínez. They will take effect this week, and benefit poor and retired citizens of the South American country, reported the daily newspaper El Comercio.

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Four Cos. to Invest $727 Mln in Ecuador

(Energy Analytics Institute, Jared Yamin, 18.Aug.2018) – Ecuador announced four companies would invest $727.85 million to boost production in a number of fields.

The companies – Triboilgas Cía. Ltda, Vinccler C.A, Arotekh C.A. and Avanzia – plan the investments in the Cuyabeno/Sansahuari, Oso, Yuralpa and Blanca/Vinita fields located in provinces of Orellana, Sucumbíos and Napo, reported the daily newspaper El Universo.

The process for the participation of companies began last March. It is anticipated that by September contracts will be signed with the companies, which are from the Latin American countries of Ecuador, Venezuela and Mexico, reported the daily.

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Guyana to Become 5th Largest Oil Producer in LAC Region

(Energy Analytics Institute, Piero Stewart, 15.Aug.2018) – If all goes off as planned, by 2025, Guyana will be the 5th largest oil producer in the Latin American and Caribbean region.

Source: Trading Economics

That’s according to an analysis of data posted by Trading Economics, and extrapolation of estimates of Guyana’s future oil production, as announced by Kevin Ramnarine, the former Energy Minister of Trinidad and Tobago.

“Oil production in Guyana is expected to come online at 120,000 barrels per day in 2020 and peak at 750,000 barrels per day by 2025, according to Exxon,” said Ramnarine, now an international petroleum consultant, during a webinar with Guyana’s Minister of Finance, the Honorable Winston Jordan and hosted by Caribbean Economist Marla Dukharan.

Considering initial production of 120,000 barrels per day in 2020, Guyana will first occupy the spot as the 7th largest oil producer in the LAC region, assuming no drastic changes in the other countries’ production profiles over the next couple of years.

However, in the process, by the time peak production is reached five years latter, Guyana will have surpassed OPEC producer Ecuador, assuming production in that country, as well as others, doesn’t experience a drastic decline, as has been the case in Venezuela in recent years.

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OPEC MOMR Shows Further Oil Declines in Venezuela

(Energy Analytics Institute, Piero Stewart, 14.Aug.2018) – Venezuela’s crude oil production declines seem unstoppable.

OPEC’s August 2018 MOMR.

Venezuela’s crude oil production fell to 1.278 million barrels per day (MMb/d) in July 2018 compared to 1.325 MMb/d in June 2018 based on secondary sources, reported OPEC in its August Monthly Oil Market Report (MOMR).

This compares to 1.911 MMb/d in 2017 and 2.154 MMb/d in 2016, according to OPEC’s data.

“According to secondary sources, total OPEC-15 crude oil production averaged 32.32 mb/d in July, an increase of 41 tb/d over the previous month. Crude oil output increased mostly in Kuwait, Nigeria, UAE and Iraq, while production showed declines in Libya, I.R. Iran, Saudi Arabia and Venezuela,” according to OPEC’s August MOMR.

Editor’s note: OPEC uses the abbreviation mb/d to stand for million barrels per day, while many oil analyst and companies frequently use the abbreviation MMb/d to stand for the same.

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CNEL EP Names Veintimilla General Manager

(Energy Analytics Institute, Ian Silverman, 13.Aug.2018) – The National Electricity Corporation (CNEL EP) named Wilfrido Demetrio Veintimilla Terreros, a professional with 41 years of experience in the electricity sector, as its new General Manager.

The decision was revealed on August 13, 2018 by the Board of Directors of the company, announced Ecuador Hydrocarbon Ministry in a statement on its website.

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World Bank Says Oil To Average $65 in 2019

(Energy Analytics Institute, Jared Yamin, 12.Aug2018) – The World Bank expects the price of oil to average $65 per barrel in 2019.

“Oil prices are expected to average $65 per barrel in 2019. While projections indicate that prices will fall from their April 2018 level, they should be supported by a continuing restriction of production by member producer countries and non-members of the Organization of Petroleum Exporting Countries (OPEC) and firm demand,” reported the daily El Diario, citing Shantayanan Devarajan, director of Development Economics and interim chief economist at the World Bank.

“The acceleration of global growth and the increase in demand are important factors that explain the widespread increases in the price of most commodities and the forecasts of higher increases in the price of these products in the future,” announced Devarajan.

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Petroamazonas EP Says Block 43 ITT Producing 75,000 b/d

(Energy Analytics Institute, Ian Silverman, 9.Aug.2018) – Block 43 ITT, located in the province of Orellana, is currently producing 75,000 barrels per day.

Production at the block is expected to reach 80,000 barrels per day by year end 2018, announced Ecuador’s Hydrocarbon Ministry in a statement on its website.

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Glencore Lands PetroEcuador ‘Spot’ Deal

(Energy Analytics Institute, Ian Silverman, 14.Jul.2018) – Glencore Ltd won a recent EP PetroEcuador spot auction, which guarantees the Ecuadorian entity income of $279.3 million.

The Swiss company offered the best bid price with a positive differential of $ 1.08 per barrel, reported the daily newspaper El Universo.

EP Petroecuador invited 42 qualified companies to the public tender, and received eight offers from Enap, Eni Trading & Shiping, Glencore, Gunvor, Phillips 66, Repsol, Trafigura, and Unipec.

The sold crude oil will come in 11 shipments of 360,000 barrels each, and to be delivered during August-October of 2018.

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Ecuador Non-Oil Exports Up in 2018

(Energy Analytics Institute, Jared Yamin, 18.Jul.2018) – Non-petroleum exports from the South American country rose to $5,484 million from January to May of 2018 compared to $5,149 million in the same period in 2017.

Exports of bananas and plantains, aquaculture, fish, flowers, plants, cocoa, processed products and metal mechanics accounted for 80.8% of total shipments abroad during the most recent five-month period, according to Proecuador, which conducted an analysis based on figures from the Central Bank of Ecuador.

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Ecuador Extracting Nearly 523 Mb/d

(Energy Analytics Institute, Piero Stewart, 18.Jul.2018) – The South America country is currently extracting nearly 523,000 barrels per day of crude oil, announced the daily newspaper El Universo.

Ecuador is seeking to urgently boost output after a June 2018 announcement by OPEC stipulating the increases.

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ENAP to Spend $65.2 Mln in Ecuador

(Energy Analytics Institute, Jared Yamin, 18.Jul.2018) – ENAP announced it will increase investments in three fields it operates in Ecuador.

“The new agreement stipulates an additional investment of $65.2 million for the drilling of 10 wells, which will allow the development of approximately 10.3 million barrels of oil through 2034,” announced Ecuador’s Hydrocarbons Ministry in a statement.

In 2010, ENAP signed a service contract for the operation of three blocks in Ecuador. Actual production from the blocks is some 18,000 barrels per day of crude oil. Lastly, in 2018, the company plans investments of nearly $50 million, according to the statement.

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Ecuador Court Upholds $9 Bln Chevron Ruling

Oil site in Ecuador. Source: AP

(AP, 13.Jul.2018) – Ecuador’s highest court has upheld a US$9.5 billion judgment against oil giant Chevron for decades of rainforest damage.

Plaintiffs celebrated the constitutional court’s decision announced Tuesday night, saying it should pave the way for indigenous tribes to receive compensation for oil spills that contaminated groundwater and soil in their Amazon home.

“There’s no doubt now that we’ve won this long legal battle,” said Pablo Fajardo, the plaintiffs’ lawyer.

But the ruling is largely symbolic, as Chevron no longer operates in the South American country. That means Ecuador’s government will have to pursue assets owned by the San Ramon, California-based company in foreign courts, where it so far has had little luck.

Chevron had long argued that a 1998 agreement Texaco signed with Ecuador after a US$40-million clean-up absolves it of liability. Chevron bought Texaco in 2001.

Last week, an appeals court in Argentina rejected an attempt by Ecuador to collect on its award, echoing earlier rulings by courts in Canada, Gibraltar and Brazil.

In 2014, a US court of appeals in New York also denied Ecuador’s request, arguing that the original judgment was obtained through bribery, coercion and fraud.

Chevron said in a statement that the high court’s decision “is consistent with the pattern of denial of justice, fraud and corruption against Chevron in Ecuador”.

It added that Chevron “will continue to work through international courts to expose and hold accountable those responsible for the judicial fraud and extortion against Chevron in Ecuador”.

In an added twist, the American lawyer, who for years represented Ecuador in the matter, was barred on Tuesday from practising law in New York state.

The New York state appeals court found Steven Donziger guilty of professional misconduct, saying that in his appeal of the 2014 ruling, he did not challenge the judge’s findings of bribery, witness tampering, and the ghostwriting of a court opinion.

The findings “constitute uncontroverted evidence of serious professional misconduct which immediately threatens the public interest,” the appeals court said in announcing its suspension of Donzinger.

Donzinger did not immediately respond to an emailed request for comment.

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Ecuador’s ITT Output Around 60 Mb/d

(Energy Analytics Institute, Piero Stewart, 13.Jul.2018) – Oil production from the Ishpingo, Tambococha and Tiputini or ITT field is around 60,000 barrels per day.

With additional work activities, production from ITT is expected to reach up to 70,000 b/d, reported the daily newspaper El Universo, citing PetroAmazonas EP Manager Álex Galárraga. The official didn’t say when production is expected to approach these levels.

Galárraga added that the state company continues to work with the respective to obtaining the environmental license for Ishpingo, which isn’t likely to be obtained until September of 2018, he explained.

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Indigenous Groups Await Chevron Payments

(Energy Analytics Institute, Ian Silverman, 12.Jul.2018) – Indigenous groups in Ecuador that were affected by activities of San Roman, California-based Chevron in the country continue to await payment from the oil giant.

Ermel Chávez, from the Amazon Defense Front, recently spoke about the issue during a press conference in Ecuador.

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FDI in LAC Region Falls for Third Straight Year

(Energy Analytics Institute, Ian Silverman, 12.Jul.2018) – Foreign Direct Investment (FDI) in Latin America and the Caribbean fell for a third straight year in 2017, reported the Economic Commission for Latin America and the Caribbean or CEPAL by its Spanish acronym.

The details were revealed in CEPAL’s annual report titled “FDI in Latin America and the Caribbean 2018.”

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Ecuador, Venezuela Output Down, OPEC Reports

(Energy Analytics Institute, Ian Silverman, 11.Jul.2018) – The Organization of Petroleum Exporting Countries published its July 2018 edition of its Monthly Oil Market Report (MOMR).

Crude oil production from Ecuador and Venezuela — the lone countries from Latin America to be members of OPEC — fell this month (see charts).

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EP PetroEcuador, Politécnica Nacional Sign Deal

(Energy Analytics Institute, Ian Silverman, 10.Jul.2018) – EP PetroEcuador and the Escuela Politécnica Nacional (EPN by its Spanish acronym) signed an Inter-institutional Technical Cooperation Agreement that relates to the early detection of seismic or volcanic phenomena that may affect the transport, storage, refining and commercialization of hydrocarbons of the state oil company, EP PetroEcuador announced in an official statement on its website.

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UDLA Students Visit Soil Treatment Center

(Energy Analytics Institute, Ian Silverman, 10.Jul.2018) – Nearly 27 engineering students studying Environmental Engineering and Biotechnology Engineering at Ecuador’s Americas University (Universidad de las Américas or UDLA by its Spanish acronym) visited the El Salado Soil Treatment Center, located in the province of Napo.

The students visited the site with the objective to gain knowledge of remediation processes utilized in the area by PetroEcuador, announced the state oil company in an official statement on its website.

The visit today was a way to understand how in reality the soil is treated from an environment point of view, reported EP PetroEcuador, citing engineering student Solange Figueroa.

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PetroAmazonas EP Producing Close to 405 Mb/d

(Energy Analytics Institute, Ian Silverman, 5.Jul.2018) – Ecuador’s PetroAmazonas EP actual production is close to 405,000 barrels per day (b/d).

The company’s average cost was $17.08 per barrel in May 2018, reported the entity in an official statement on its website.

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Ecuador Cos Invest $400 Mln in Certificates

(Energy Analytics Institute, Jared Yamin, 4.Jul.2018) – The two electric companies from the South American country will invest a total of $400 million in Treasury Certificates.

The companies, the Electricity Corporation of Ecuador (Celec by its Spanish acronym) and the National Electricity Corporation (Cnel by its Spanish acronym), will invest $300 million and $100 million, respectively, reported the daily newspaper El Universo.

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Ecuador Looks to Avoid Issuing More Debt

(Energy Analytics Institute, Jared Yamin, 4.Jul.2018) – The South America country will explore other financial options to cover its deficit of some $9.5 billion.

“We don’t believe it’s the best time for Ecuador to issue bonds,” reported the daily newspaper El Universo, citing announcements made by Ecuador’s Finance Minister Richard Martinez during a press conference in Quito.

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OPEC Ministerial Meeting in December

(Energy Analytics Institute, Piero Stewart, 25.Jun.2018) – Ministers from the Oil Exporting Countries Organization (OPEC) announced during meetings in Vienna, Austria that the 5th OPEC+ countries Ministerial Meeting will take place in the same city on December 4, 2018.

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OPEC Planning to Boost Output by 1 MMb/d

Twitter post from Ecuador’s Hydrocarbon Ministry.

(Energy Analytics Institute, Jared Yamin, 22.Jun.2018) – OPEC is looking to boost crude oil output by 1 million barrels per day (MMb/d).

The production agreement goes into effect in July 2018, the Organization of Petroleum Exporting Countries (OPEC) announced today in Vienna, Austria. Ecuador’s Hydrocarbon Ministry later published the details in a Twitter post.

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OPEC’s Vienna Meeting: The Challenge of Failing NOCs

(The Council on Foreign Relations, Amy Myers Jaffe, 19.Jun.2018) – As energy ministers from major oil producing countries gather in Vienna this week to discuss the stability of global oil markets, the variables that will dictate outcomes have rapidly shifted. Pre-meeting narratives that previously focused on the appropriate level of external private investment—either too much, in the case of U.S. shale producers, or too little, in the case of private sector international oil companies—look woefully inadequate to explain current oil market conditions. Instead, how to deal with the accelerating political and institutional breakdown of several national oil companies across multiple continents now stands out as a pressing structural challenge for the Organization of Petroleum Exporting Countries (OPEC) and U.S. policymakers alike. I highlighted this problem vis a vis Venezuela last March. Stated intentions to replace lost barrels from Venezuela and potentially Iran has brought acrimony back into the OPEC fray. U.S. plans to sanction Iran’s oil exports are the most recent publicly visible geopolitical irritant, but the history has shown that eliminating the endogenous geopolitical swings in the oil cycle takes more intervention and planning capability than even the most well intended partnerships can master, much less nation states whose relations have been punctuated by direct military threats or proxy wars. Talk of a sustained Saudi-Russian alliance that would be effective in eliminating the factors that could cause gyrations in oil prices seem overstated.

All of OPEC’s fourteen members have flagship national oil companies (NOCs), that is, state-controlled entities that oversee their nation’s energy industry. Other important oil producing countries such as Brazil, Mexico, and Russia also have NOCs that dominate their oil and gas sectors. Many of these national firms are facing structural budgetary, corruption, or other internal political challenges, including attacks on facilities by local rebel groups, criminal gangs, terrorists, cyber hackers, and/or armed combatants in ongoing military conflicts.

As a result of these ongoing NOC difficulties, supplies from several OPEC countries, Venezuela, Libya, Iraq, Iran, Nigeria, and Angola have been volatile in recent years. In particular, the collapse of Venezuela’s oil industry and a slide in deep water oil production from Angola have been more instrumental to the market success of OPEC’s agreement with Russia and other non-OPEC oil producers than the producer group’s “planned” cuts in reducing excess inventories by almost 200 million barrels since early 2017 and pushing Brent oil prices up from about $55 to $75 a barrel. Cornerstone Macro noted in a recent report that oil stocks in industrialized countries experienced a counter seasonal decline of three million barrels in April, as compared to the more customary twenty million buildup on the heels of reduced global supplies and more robust than expected U.S. and global economic growth.

While Saudi Arabia, Kuwait, the United Arab Emirates, and Russia did make promised output reductions to help tighten oil supply over the course of 2017, unintended production declines continue to be more material. Not only did oil output declines from Venezuela, Algeria, Angola, Ecuador, and Gabon amount to losses of close to one million barrels a day since early 2017, according to Citibank, markets have come to expect accidental supply disruptions from conflict prone oil regions in Libya and Nigeria. That reality prompted one prominent energy columnist to conclude that OPEC has become “an increasingly unreliable supplier of an essential commodity.”

Whatever the outcome of the OPEC-non-OPEC Vienna group’s deliberations this week, it could turn out to be only a temporary fix to this more structural NOC problem than generally understood. Right now, OPEC spare productive capacity is highly limited. Saudi Arabia and Russia together would probably have difficulty adding much more than 1.5 million barrels a day to markets through the end of the year. Ongoing problems in Libya and Venezuela, combined with renewed sanctions on Iran, could possibly take more than that off the market. And what if a new supply problem emerges? Saudi Arabia and Russia are discussing longer run cooperation. What would that look like in a world where uncertainty plagues many national oil companies around the world, including, perhaps, their own firms?

Does budget-constrained Saudi Arabia agree to divert billions in tandem with Russian firms to expand additional oil fields’ productive capacity down the road to capture future market share that could be available as NOCs in other countries continue to fail? If Saudi and Russia make capacity expansion pushes, what becomes of OPEC as a coherent organization? Will the Vienna group need to shrink in number? Conversely, if Saudi Arabia and Russia choose to make only a quick stop-gap measure just to keep markets from overheating in the next few months and don’t invest in new capacity, will they sacrifice future revenues to private oil and gas investors who can bring on capacity more quickly if NOC capacity continues to falter?

The 2014-2015 price collapse has proven that a year or two of low prices won’t be sufficient to knock out growth in U.S. tight oil. That means restarting a price war in the short run isn’t an ideal option for OPEC, especially if those flooding the market do not appear to be able to survive the prolonged revenue drop that would make a price war option an effective threat. And my guess is that low oil prices also aren’t likely to be sufficient to knock out capital investment by the major international oil companies (IOCs). Those companies have started to pivot their strategies to direct their capital spending to activities that will be more productive than those pursued over the last decade when booking new large reserves was the priority. Rather, companies are focused on spending programs that can bring higher production more quickly, such as directing capital spending to shorter cycle field extensions and satellite field developments that can bring first oil into the market rapidly within one to three years (as opposed to mega-projects that took near a decade to develop). Companies are also developing new techniques to reduce the cycle time and costs on challenging green field projects.

Moreover, innovation in the private oil and gas sector is increasingly de-risking the landscape for future oil and gas investment for private investors. As technology improves, companies are going to be able to squeeze more barrels out of all kinds of existing known in place source rock, not just oil and gas from shale formations. The most recent example is the Austin Chalk where U.S. companies are rushing to test new drilling techniques to positive results.

There’s an additional rub. Saudi and Russian efforts could have trouble influencing intermediate oil demand trends. Even if the Vienna group takes production increase decisions this week that staves off any economically crippling oil price shock that could have sent oil demand into a tailspin, caution signs are already emerging that oil prices even at $70 a barrel are creating some economic headwinds. Markets are already nervous about trade wars. Reports are emerging that high fuel prices are hindering economies within the Euro zone and elsewhere. Rising fuel prices are visibly creating economic and political problems in India and other developing economies. And the United States needs strong demand growth elsewhere to manage its own economic issues. In the case of an unexpected global economic slowdown, OPEC supply disruptions could take a back seat again to “lower for longer” story lines about failing oil demand (potentially in the midst of rising U.S. production in 2019), which could make any discussion of a more permanent, workable Saudi-Russia oil alliance even harder to envision.
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PetroAmazonas Production Costs Below $20/bbl

(Energy Analytics Institute, Aaron Simonsky, 15.Jun.2018) – Production costs at the state entity remain below the $20 per barrel mark.

PetroAmazonas EP’s production costs rose slightly to $17.01/bbl in May 2018, up sequentially from $16.46/bbl in April 2018. For the first five months of 2018, the company’s production costs have averaged $17.08/bbl, according to data posted to Twitter by EP PetroEcuador.

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PetroEcuador Activities Normal After Earthquake

(Energy Analytics Institute, Aaron Simonsky, 15.Jun.2018) – Ecuador’s EP PetroEcuador announced all its activities continue under normal conditions after a magnitude 5 earthquake was reported this morning in Ecuador.

The epicenter was identified as Nobol (Guayas), the state entity reported in a Twitter posts.

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Ecuador Oil Output at 519 Mb/d in May 2018

(Energy Analytics Institute, Jared Yamin, 15.Jun.2018) – Ecuador’s production of crude oil reached 519 thousand barrels per day (Mb/d) in May 2018, up compared to 518 Mb/d in April 2018, the Organization of Petroleum Exporting Countries (OPEC) reported in its monthly oil report.

Ecuador, one of only two OPEC member nations in Latin America, produced 545 Mb/d in 2016 and 530 Mb/d in 2017, according to OPEC.

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Venezuela Oil Output Slides to 1.4 MMb/d in May 2018

(Energy Analytics Institute, Piero Stewart, 14.Jun.2018) – Venezuela’s oil production continues its downward slope.

Venezuela’s crude oil production fell to 1.392 million barrels per day (MMb/d) in May 2018, according to a recent report by the Organization of Petroleum Exporting Countries (OPEC), citing data from secondary sources. This compares to production of 1.434 MMb/d in April 2018, 1.474 MMb/d in March 2018, and 2.154 MMb/d in 2016.

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Ecuador Producing 522 Mb/d of Crude Oil in late May 2018

(Energy Analytics Institute, Jared Yamin, 29.May.2018) ‐- South America’s Ecuador is producing 522,372 barrels per day.

Total crude oil production from the small OPEC member nation was 522,372 barrels per day (b/d) on May 28, 2018, according to data posted in a report available on the website of the Ecuador’s Hydrocarbon Regulation and Control Agency or ARCH by its Spanish acronym. Of the total production, Petroamazonas EP contributed 403,141 b/d, while private companies contributed the remaining 119,232 b/d.

Ecuador’s average crude oil production was 512,000 b/d during the three-month period January thru March of 2018, according to data from Ecuador’s Central Bank or BCE by its Spanish acronym.

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Energy, Education, and Learning Through NRG ED

(Energy Analytics Institute, Aaron Simonsky, 24.May.2018) – Energy Analytics Institute, formerly LatinPetroleum Inc., continues to promote its “Energy Education Initiative” in the Americas, also known as “NRG ED.”

NRG ED is structured to work with K-12 schools, community colleges, four-year colleges and universities, workforce training programs, communities and businesses, and aims to promote reduction of non-renewable energy usage in favor of renewable energies. However, the core of the initiative is education, without which the NRG ED initiative would not be.

“At its core the initiative is really focused on education,” said Chad Archey, Editor-in-Chief at Energy Analytics Institute from Atlanta, Georgia.

EAI views basic education as most important in the overall learning process and also promotes educational initiatives and research from grade school to the professional level related to the energy sector. EAI aims to foment constructive dialogue regarding energy usage as well as ways to reduce the carbon footprint left by non-renewable energy resources through the following: 1) educational consultancy, 2) development and distribution of educational and training materials, and 3) promotion of debate and discussion regarding renewable energy alternatives.

Energy Analytics Institute (EAI), formerly LatinPetroleum Inc. (dba LatinPetroleum.com), is a Houston-based independent company focused on producing non-biased news, updates and special reports for investors interested in the Latin America and Caribbean petroleum sectors.
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ECLAC Ssays Venezuela’s Economic Activity to Fall 8.5% in 2018

(Energy Analytics Institute, Aaron Simonsky, 1.May.2018) – The United Nations Economic Commission for Latin America and the Caribbean, also known as ECLAC or CEPAL by its Spanish acronym, projects economic activity in troubled Venezuela will contract 8.5% in 2018.

Gross domestic product or (GDP) estimates for other important countries and regions follows:

TABLE 1: ECLAC GDP ESTIMATES FOR 2018

Country/Region —————————- GDP (Est.)

Argentina ———————————— 2.5%
Bolivia ————————————— 4.0%
Brazil —————————————- 2.2%
Chile —————————————– 3.3%
Colombia ———————————— 2.6%
Ecuador ————————————– 2.0%
Paraguay ————————————- 4.0%
Uruguay ————————————– 3.0%
Venezuela ———————————– (8.5%)

Latin America and Caribbean (LAC) —- 2.2%
South America —————————— 2.0%
Central America and Mexico ————- 2.6%
Central America —————————- 3.6%
Latin America ——————————- 2.2%
Caribbean ———————————— 1.4%

Source: ECLAC, April 2018
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Pampa Energía Announces Settlement Agreement in Ecuador

(Pampa Energía S.A., 19.Mar.2018) – Pampa Energía S.A. announced that regarding the conflict that EcuadorTLC (a subsidiary company established in the Republic of Ecuador and which Pampa holds a 100% ownership directly and indirectly) held with other members of the Bloque 18 Consortium (the ‘Plaintiff Parties’) against the Republic of Ecuador, and which award resolution went through the International Arbitration under the UNCITRAL’s rules (Case CPA No. 2014-32: 1. EcuadorTLC S.A. et al. c. 1. The Republic of Ecuador 2. EP Petroecuador) (the ‘Arbitration’). The participation of EcuadorTLC in the Bloque 18 Consortium is 30% and the Final Award duly issued by the Arbitration Court and corresponding to EcuadorTLC stake, amounts to $176 million (the ‘Final Award’).

With respect to the Arbitration, on March 19, 2018, the Republic of Ecuador and the Plaintiff Parties executed an agreement (the ‘Agreement’) by which the Plaintiff Parties will not pursue the collection of the Final Award, in exchange for a compensation for general damages, that in the case of EcuadorTLC consists of (i) release from fiscal and labor claims currently in trial stage, amounting for more than $100 million, and (ii) an additional compensation of $68 million before the end of first half 2018 (including the recovery of granted guarantees). Furthermore, we estimate that the Agreement will generate an approximate net reporting profit of US$40 million.

Moreover, the Republic of Ecuador has declared and acknowledged within the Agreement that (i) said agreement is completely valid and binding to the Republic of Ecuador, (ii) any payment default by the Republic of Ecuador under the Agreement will allow the Plaintiff Parties to fully execute the Final Award, and (iii) there is no pending obligation remaining by the Plaintiff Parties in relation to the Bloque 18 Consortium’s operation and exploitation.

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Shushufindi Plant Has 20 Mb/d LPG Capacity

(Energy Analytics Institute, Clifford Fingers III, 10.Mar.2017) – Ecuador’s Shushufindi refinery has the capacity to bottle or fill 20,000 cylinders per day of liquefied petroleum gas or LPG, Ecuador’s Hydrocarbon Ministry wrote in a twitter post, citing Oil Minister Jose Icaza Romero during a visit to the plant.

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ICSID Orders Ecuador Pay ConocoPhillips $380 Mln

(ConocoPhillips, 8.Feb.2017) – ConocoPhillips’ wholly owned subsidiary, Burlington Resources Inc., received an arbitration award of $380 million from an international arbitration tribunal, constituted under the International Centre for the Settlement of Investment Disputes (ICSID), for Ecuador’s unlawful expropriation of Burlington’s significant investment in breach of the U.S.-Ecuador bilateral investment treaty.

“The Tribunal’s decision on damages sends a clear message that governments cannot expropriate investments without fair compensation,” said Janet Carrig, senior vice president, Legal and General Counsel. “ConocoPhillips sought to protect its interests to the fullest degree and the Tribunal acknowledged our legal rights and the unlawful nature of Ecuador’s actions.”

The decision is subject to potential annulment proceedings, but the company believes any application seeking to annul the award would be meritless and ConocoPhillips would strongly defend against it. The timing and manner of collection remain to be determined.

The Tribunal also issued a separate decision finding that Ecuador was entitled to $42 million for limited environmental and infrastructure impacts associated with the operations of the Consortium (comprising Burlington and Perenco). The Tribunal noted that “…while Ecuador also prevailed on part of its counterclaims, the amount awarded to Ecuador is an extremely small percentage of the amount claimed.”

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Ecuador Announces $1 Billion Bond Placement

(Energy Analytics Institute, Ian Silverman, 16.Jan.2017) – Ecuador, the only other Latin American country to belong to the Organization of Petroleum Exporting Countries (OPEC), successfully completed a $1 billion bond placement, announced President Rafael Correa in an official Twitter post.

The bonds, placed on January 10, 2017, have an annual interest rate of 9.1 percent and mature in 2027.

Demand for the offering was $2.2 billion, which “reflects confidence in the country,” wrote Correa.

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PetroEcuador Reports Increase In Shareholder Equity

(Energy Analytics Institute, 27.Jun.2016, Clifford Fingers III) – EP PetroEcuador announced its Shareholder’s Equity rose to $5.659 billion in 2015 compared to $3.914 billion in 2014, reported the state company in an official statement.

The company’s total assets rose to $9.662 billion in 2015 compared to $8.604 billion in 2014.

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Ecuador’s SOTE Pipeline Spans 503 Kms

(Energy Analytics Institute, 27.Jun.2016, Clifford Fingers III) – Ecuador’s SOTE pipeline spans 503 kilometers from the pumping station Lago Agrio No. 1 in the Amazon to the Balao Maritime Terminal in the province of Esmeraldas, announced EP PetroEcuador in an official statement on its website.

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Ecuador’s SOTE Celebrates 44 Years of Operation

(Energy Analytics Institute, 27.Jun.2016, Clifford Fingers III) – The TranEcuadorian Oil Pipeline (SOTE by its Spanish acronym) was inaugurated on June 26, 1972 with a capacity to transport 250,000 barrels per day. During its active life, the pipeline has transported 4,750 million barrels of oil, EP PetroEcuador announced in an official statement on its website.

Later work on the pipeline allowed the company to expand the pipeline’s capacity from 250,000 barrels per day to 300,000 barrels per day in 1987; to 325,000 barrels per day in 1992; and 360,000 barrels per day in 2000, reported the company, citing PetroEcuador General Manager Pedro Merizalde Pavón.

The pipeline starts at Lago Agrio in the eastern region of Ecuador and spans 497 kilometers to the Balao Maritime terminal in the Esmeraldas province. The pipeline is under constant surveillance by PetroEcuador via its SCADA system and an estimated 381 technicians, all of them from Ecuador, work to maintain the pipeline in operation and perform maintenance when necessary.

Recent earthquakes have not affected the pipeline’s terminals or transport infrastructure, according to PetroEcuador.

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PetroEcuador to Export No. 6 Fuel Oil in July

(Energy Analytics Institute, 27.Jun.2016, Clifford Fingers III) – Trafigura PTE LTD won a bid by EP PetroEcuador whereby the former will export 950,000 barrels of No. 6 Fuel Oil, announced EP PetroEcuador in an official statement on its website.

The winning bid had a $1.49 per barrel discount.

The shipments from Ecuador will be processed in 5 shipments of 190,000 barrels each. The first shipments could leave the country during July 11-13, 2016.

The state oil company had invited 33 companies — qualified to offer No. 6 Fuel Oil — to bid for the exportation of the product, announced the state oil company in an official statement on its website.

The companies — Arkham S.A, B.B Energy (Asia), PTE LTD, Citizens Resources LLC, Glencore LTD, Novum Energy Trading Corp, Trafigura PTE LTD and Vitol INC — presented their offers on June 23, 2016. PetroEcuador announced that 7 offers were received as well as 8 excuses. Due to a tie related to two offers, the said companies had another 24 hours to present their new offers.

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EP PetroEcuador Lays Out Goals for 2016

(Energy Analytics Institute, 27.Jun.2016, Clifford Fingers III) – EP PetroEcuador revealed some of its goals for 2016, reported the state company in an official statement.

The goals for 2016 include, but are not limited to the following:

— Operation of product pipeline Pascuales Cuenca,

— Company restructuring,

— Construction of new building for EP PetroEcuador in the city of Guayaquil,

— Civil-mechanical remediation at the Gas de Bajo Alto Plant,

— Modernization of coastal oil and product pipelines,

— 100 percent operation of the Esmeraldas refinery (Editor’s note: goal achieved in 2015),

— Implementation of KBC best practices,

— Overhaul of the La Libertad refinery,

— Environmental overhaul of 76,000 cubic meters of soil,

— Laboratory certifications ISO 17025,

— Social compensation programs,

— Environmental auditing processes,

— Improvement in the quality of fuels,

— Optimization of the new Monteverde terminal (sanitary and chemicals),

— Remodeling and certification of all service stations,

— Port facilities – entrance of 40,000 metric-ton ship in Tres Bocas,

— Supply of ECOPAIS gasoline in more regions of the country (Machala, Los Ríos and Azuay), and

— Construction of the portable water projects.

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PetroEcuador Helps Control Fuel Oil Spill

(Energy Analytics Institute, 24.Jun.2016, Clifford Fingers III) – EP PetroEcuador turned over formal activities related to the containment, cleaning and monitoring along the Daule river, kilometer 24 in the Merced sector of Guayaquil to the company Balsasud Balsera Sudamericana, reported the state oil company in an official statement on its website.

On June 21, 2016 PetroEcuador announced that it had lent a helping hand to water company Interagua and Citizens Security Committee to control a fuel spill in the Daule River.

The spill of Fuel Oil No. 4 occurred when the fuel was being transported by a private tanker owned by Balsasud Balsera Sudamericana.

PetroEcuador assisted by sending technical personnel from its Security, Health and Environment department along with others from other departments to assist with the cleanup process.

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Ecuador Permits Alcoholic Beverages at Service Stations

(Energy Analytics Institute, 21.Jun.2016, Clifford Fingers III) – Ecuador has decided it will allow its service stations to again distribute alcoholic beverages.

The distribution of alcoholic beverages at the stations will have some restrictions, reported the daily El Universo, citing Ecuador’s Interior Vice-Minister Diego Fuentes. The beverages cannot be consumed internally and products should have a ‘moderate alcoholic content. ‘

The government will also allow alcoholic beverages to be sold on Sundays. The sale of such beverages was restricted in 2010 as the Ecuadorian government sought to reduce the indices of violence and other insecurities while also trying to promote family union. The government also restricted the sale of alcoholic beverages between Monday and Saturday at so-called fun parks.

The move to sell alcoholic beverages on Sundays will allow Ecuador to “reactivate tourism and commerce in the country,” said Fuentes.

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Ecuador Oil Output 556 Mb/d in May 2016

(Energy Analytics Institute, 21.Jun.2016, Clifford Fingers III) – Ecuador’s oil output reached 556,000 barrels per day in May of 2016, up sequentially from 555,000 barrels per day in April of 2016, reported the Organization of Petroleum Exporting Countries (OPEC) in its June 2016 Monthly Oil Market Report (MOMR), citing data from direct communications with the Andean nation.

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Three Companies Interested in Esmeraldas Overhaul

(Energy Analytics Institute, 16.Jun.2016, Clifford Fingers III) – Three companies, Adelca, Novacero and Practipower, presented their bids to buy an estimated 6,500 tons of salvage left over from the Esmeraldas Refinery overhaul.

A total of 29 companies from Ecuador were qualified to present bids for salvage from the Esmeraldas Refinery such as electronic equipment, furnaces, bulbs, reactors and other pieces that were replaced during the recent overhaul of the refinery, reported EP PetroEcuador in an official statement on its website.

The bids will be analyzed and a winner will be announced within 48 hours, said Omar Quijano, an EP PetroEcuador executive with the law division within the state oil company.

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