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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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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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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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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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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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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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 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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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 Reports 79% Decline In EBITDA

(Energy Analytics Institute, 25.May.2016, Clifford Fingers III) – EP PetroEcuador reported operational revenues of $9.284 billion in 2015, down $6.458 billion or 41 percent compared to $15.742 billion in 2014 due to variations in international oil prices, reported the state company in an official statement.

Operational expenses were $8.209 billion in 2015, down $2.441 billion or 23 percent compared to $10.650 billion in 2014 due to the price of hydrocarbon imports. As a result, EBITDA in 2015 fell $4.017 billion or 79 percent to $1.075 billion compared to $5.092 billion, respectively.

After taking into account Depreciation, Depletion & Amortization (DD&A) and other operational expenses, PetroEcuador reported EBIT of $0.971 billion in 2015 compared to $4.999 billion in 2014. After taking into account non-operational results of ($0.219) billion in 2015 and ($0.192) billion in 2014, the company reported net results of $0.752 billion in 2015, down $4.055 billion or 84 percent compared to $4.807 billion in 2014.

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Ecuador Considers Venezuela as Partner in Refinery

(Energy Analytics Institute, 30.Mar.2016, Clifford Fingers III) – While Ecuador continues to seek financing from foreign investors looking to invest in the estimated $13 billion Pacific Refinery project, the country continues to reserve an interest for Venezuela.

“Venezuela is part of the project and is a strategic partner that will have an approximate 30 percent interest in the project,” reported the daily newspaper El Universo, citing Strategic Sector Coordinating Minister Rafael Poveda.

“To-date, Venezuela has made the necessary contributions as required,” said Poveda. In the future when the project advances to the construction phase it is expected that Venezuela will continue to contribute its allocated contributions to the project, he said.

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PetroEcuador Esmeraldas Refinery Restarts FCC Unit

(PetroEcuador, 18.Sep.2015) – PetroEcuador says activities initiated on September 11, 2015 to restart the fluid catalytic cracker unit at the Esmeraldas refinery, according to a statement posted to the state oil company’s website.

The definitive restart of FCC unit is estimated for late-November 2015. The unit has undergone 14-months of work. The new FCC unit will allow for a 20,000 barrel per day (b/d) increase in capacity.

PetroEcuador also plans to restart the #2 oil plant in November.

Both the FCC unit and the #2 oil plant are expected to be 100% operative by YE:15, according to PetroEcuador.

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$1.2 Bln Esmeraldas Rehab Work Near Complete

(PetroEcuador, 18.Sep.2015) – PetroEcuador says that overhaul work is being performed on processing units at the 110,000 barrel per day (b/d) capacity Esmeraldas refinery that have deteriorated due to inadequate maintenance work, according to a statement posted to the state oil company’s website.

Work is being performed on the catalytic No. 1 and No. 2 units with capacity to process 50,000 b/d each. The FCC unit has also undergone intervention while new units constructed during the work overhaul include: demineralizer and effluents plants; 2 raw water pits; and a quality control laboratory.

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Journalist Round Table with Rafael Ramirez

(Energy Analytics Institute, Piero Stewart, 31.Jul.2013) – PDVSA President Rafael Ramirez held a small round table with journalist in Caracas, Venezuela.

What follows are excerpts from the discussion.

Rafael Ramirez on the petroleum sector and the current government administration under Venezuelan President Nicolas Maduro:

Rafael Ramirez: We have firmly established our political strategy related to the oil sector.

We are currently entering a stage of production expansion and will concentrate all of our work and energies on reaching our goals and increasing production capacity in Venezuela.

If we look back, we received the petroleum sector (in late 1999) during a phase of privatization in the downstream, midstream, and upstream sectors, especially PDVSA.

But Venezuela has entered a new expansion stage of petroleum sector policies and PDVSA is entering into the Expansion Phase of the Faja development.

In terms of the sabotage that our oil industry has seen, we continue to feel the effects of these actions and damage mostly in Western Venezuela where we have experienced a drastic drop in production.

After the oil sector strike in 2002-2003, we established our petroleum sector plan. We oversaw the migration of operating contracts (of 33 companies with contracts we saw 31 of the companies migrate to the new contracts without problems, only ExxonMobil and ConocoPhillips decided to exit the migration process and eventually exit Venezuela altogether). We also oversaw changes and modifications to laws, fiscal changes such as reestablishing royalties and taxes.

The year 2010 marked the beginning of the new expansion stage for the Venezuelan oil sector. From 2004-2010 we worked on nationalization, migration process to new contracts, and PDVSA regaining control of the oil sector by increasing its participation from an average 49% in JVs to a minimum of 60%. We are now in the stage of increasing the production of oil.

In all, we spent ten years (2000-2010) recuperating PDVSA, under the watch of late-President Hugo Chavez Frias.

Ramirez: We are employing many engineers from public schools here in Venezuela for various jobs, including rig operations.

On the petroleum sector expansion process:

Ramirez: In 2013, we have been concentrating our efforts on recuperating production capacity of 4 MMb/d by year end 2014 and 6 MMb/d by year end 2019 (of which 4 MMb/d will come from the Faja). For this to happen, it is fundamental that we move two elements: development of the Faja and development of an industrial base. [See also information on industrial meetings with private sectors across the country].

We need to construct a production capacity of 3 MMb/d in the Faja. This runs parallel with work we have been conducting in the Faja related to the industrial meetings with the private sector.

The government is working hard with the private sector for the second phase of the Faja development. Hence the Six National Productive Meetings we had to gauge interest in the private sector to participate in projects with the government and PDVSA.

We are working with private (transnationals) companies as well as the Venezuelan Hydrocarbon Association or AVHI but I must reiterate: “The companies that do not want to help PDVSA increase its production capacity can simply leave the country.”

We have received positive feedback from CNPC and Chevron and we are awaiting response from other companies such as Repsol, among others, in terms of new financing deals related to petroleum sector projects.

We plan to create investment funds for all the Faja JVs whereby “the Venezuelan citizens” will participate.

The government will create four investment districts in the Faja. In Sep.2013 the government will announce plans and create development schemes, special fiscal schemes for the four districts that are located in each of the four Faja blocks.

Ciudad Bolivar will be the main city that Venezuela will use for the development of the Faja since it already has an airport and universities.

Development of the Faja will be the most important prospect for Venezuela in this Century.

The government is working with private companies regarding funding and the use of money solely to increase production.

The government realizes that a number of private companies that have converted to JVs have had problems increasing production (operating costs around $12/bbl, including G&A). Regardless, the government wants the companies to maintain operations in Venezuela and increase production. However, private companies that cannot maintain these operating costs should be operated by PDVSA. We are looking to drastically reduce overhead costs. Again, we don’t want small operators to leave, but we want them to merge their operations to reduce overhead so that they can focus on increasing production.

We are starting a push for reduction of costs and more efficiency in our production. In the Western region of the country we have had a lot of success implementing this strategy and we have stopped the production declines in the region.

The government wants companies in Zulia in Falcon state to be more efficient and is trying to help them reduce their overhead.

On the Faja reservoir spanning into Colombia:

Ramirez: The Faja does not extend to Colombia, only to Guarico state in Venezuela in its most western extension. There are individuals in Colombia that are trying to convince investors that Colombia shares the same geology as Venezuela, which is not true. Pacific Rubiales has sold a lot of stock selling this story to investors. The Faja formation in Venezuela is different than the one in Colombia.

On the Chinese Fund and other financing issues:

Ramirez: Close to 94% of foreign income that Venezuela generates comes from the petroleum sector.

Venezuela will sign a $5 bln funding (Fondo Chino or Chinese Fund) in Sep.2013 in the presence of President Nicolas Maduro in China.

The amount of barrels that are sent to China to repay loans varies each month due to changes in oil prices. When oil prices are high, the barrels that need to be sent to China decline, while any excesses are returned to PDVSA.

We sold $21.9 bln to the Venezuelan Central Bank or BCV during 2001-Jun.2013. In 2013, we plan to sell $47 bln to the BCV.

In 2012, PDVSA paid down debt by about $4 bln, this figure stood at $34.4 bln at YE:12

Money on our Balance Sheet as of June 30, 2013 ($12 bln) includes investments (commercial credit) from Rosneft, CNPC, Gazprom, Chevron. Money from new JVs could be used in the SICAD weekly auctions when the companies need access to Bolivars. This will also reduce the companies’ needs to participate in illegal activities to obtain Bolivars.

PDVSA will not issue more debt in USA dollars but instead in Bolivars as it is easier to pay back this debt in the local market than in dollars.

On Venezuelan windfall tax scheme:

Ramirez: The following table (See Table 1) lays out Venezuela’s windfall tax scheme.

Table 1: Venezuela windfall tax payment to Fonden

Price of oil ——- Payment % to FONDEN

$80/bbl ——— 20%

$80-$100/bbl —- 80% of the difference

$100-$110/bbl —- 90% of the difference

>$110/bbl ——– 95% of the difference

Source: PDVSA

FONDEN is a national development fund which is similar to a fund that is run by the Norwegians. “I don’t see anybody criticizing the Norwegians,” but this government is overly criticized.

On oil exports, shale developments worldwide and other issues:

Ramirez: PDVSA is an operational company. We are constantly balancing things out. We have debts but we have revenues. We have financing but we have capitalization.

Increases in interest rates under the Petrocaribe initiative were not called for by PDVSA. The conditions remain unchanged.

Venezuelan oil exports are down due to increased use of diesel in the domestic market to generate electricity.

Shale oil developments do not affect Venezuela. We are not worried about shale oil developments going on worldwide. However, most of the shale resources in Venezuela are located in Maracaibo Lake area where they amount to about 13,000-19,000 MMbbls.

We are evaluating to what depths we have shale in the Urdaneta field. Venezuela has shale resources in Lake Maracaibo which are four times as much as those claimed by Colombia. We need to drive to deeper horizons where there are larger concentrations of oil. Although we have shale resources in Falcon state we will continue to look for convention oil and gas. There is tremendous liquids potential offshore Falcon state.

A $100/bbl oil price does not permit the development of shale oil. So we need a good oil price and $100/bbl is a good price, not just for Venezuela.

Oil price sensitivity: For each $1/bbl decline/rise in oil prices, Venezuela losses/gains $700 mln per year in revenues.

As a result of the Perla 3x offshore gas discovery which also unveiled large condensate potential, we have decided to drill offshore Falcon state in search of additional condensate potential.

Oil production at the Sinovensa JV is around 140,000 b/d but we expect this production to reach 165,300 b/d by year end 2013 and ultimately 330,000 b/d.

During 1992-1999, Venezuela’s 4th Republic reported fiscal revenues of just $23.5 bln, while the Revolutionary Government (under former Venezuelan President Hugo Chavez and now President Nicolas Maduro) has reported fiscal revenues of $448.8 bln during 2000-Aug.2013 (as of 1.Aug.2013), of which $310.3 bln came from changes in new laws (i.e. increasing taxes and royalties and increasing PDVSA’s participation in oil projects).

Venezuela’s oil production declines on average 700,000 b/d a year or around 20-25% per year. However, Venezuela adds an average 700,000 b/d of production to make up for the short fall and maintain production around 3,000 Mb/d.

In the Faja the production declines are not as pronounced since it is a newly developed area, but in Zulia state in Lake Maracaibo the declines are more pronounced.

On gasoline issues:

Ramirez: The government is working to install an automatic chip system and even GPS systems in Tachira state as there are reported cases of cars in Colombia with Venezuelan license plates that are crossing the Colombian/Venezuelan border each day to buy cheap gasoline in Venezuela to later sell it in Colombia.

The government is looking to implement the export of Venezuelan gasoline to Colombia to reduce the demand for gasoline in Colombia.

On refineries:

Ramirez: El Palito refinery will receive heavy oil from the Faja in the future while the Puerto la Cruz refinery will also process oil from the Faja. We will continue to use light oils for mixtures or for export.

Changes/upgrades at existing refineries are being done to increase the heavy oil processing capacity.

Plans to build three new refineries in Venezuela have not changed.

The government has proposed that companies convert upgraders into refineries or upgrade the oils to 42 degrees API so that it can be exported or mixed with other oils and thus avoiding potential bottlenecks in Venezuela.

Our agreements with Eni are to build a refinery and not an upgrader. The majority of the finished products from this refinery will be diesel with specifications established for European markets. The 300,000 b/d capacity refinery with Eni is a move by the Italian company to pay lower taxes.

On Ecuador:

Ramirez: PDVSA has reduced its interest in Ecuador’s Pacific Coast Refinery to 19% from 49% to allow entrance of CNPC with a 30% interest. Petroecuador will continue to hold a 51% interest in the project. Nonetheless, PDVSA still plans to send 100,000 b/d to the refinery for processing.

On the USA and potential divestment of CITGO refineries:

Ramirez: The US market has a large processing capacity for heavy oils. In regards to divesting of our interest in CITGO; it is not viable to sell individual refineries in the USA. It would only be interesting if they (the CITGO refineries) could be sold as a packaged deal.

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Ecuador Open Market Meetings in Houston

(Energy Analytics Institute, Ian Silverman, 25.Jun.2013) – PetroEcuador holds open market committee meetings in Houston, Texas.

Highlights from the discussion follow:

Comments from PetroEcuador International Commerce Executive Nilsen Arias:

  • “Oil’s contribution to the energy matrix was 85% in 2010, but will fall to 65-70% in 2013.”
  • “Demand for gasoline, diesel and naphtha to exceed production.”
  • Feb.2014 will mark the turnover of Las Esmeraldas refinery which will allow it to produce clean fuels.
  • Ecuador does not have refining capacity to produce LPG, diesel, naphtha, which are imported.
  • LPG imports used for domestic cooking in Ecuador.
  • Cutterstock used for produce fuel oil in Ecuador.
  • Ecuador imports high octane naphtha and ultra-low diesel.

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