GlobalData’s latest report, Ecuador Exploration & Production, 2021, indicates that Ecuador’s total production peaks in 2022, increasing from 483 thousand barrels of oil equivalent (mboed) in 2020 to 527 mboed before declining 3.6% by 2025 to 508 mboed. Production stems mainly from onshore projects in the Oriente Basin and is driven by conventional oil and heavy oil fields. Conventional oil fields accounted for approximately 77% of crude oil and condensate production in 2020 where production decreases 4% from 393 thousand barrels per day (mbd) in 2022 to 376 mbd in 2025. Heavy oil projects help mitigate the country’s liquids decline, responsible for the crude oil growth seen in Ecuador in 2024, increasing 20% over 2020 to 135 mbd in 2024. Production then declines relatively slowly at 3% by 2025 to 131 mbd. Natural gas production steeply declines 37% over the next 5 years from 130 million cubic million cubic feet per day (mmcfd) in 2020 to 82 mmcfd by 2025.
Ecuador’s shifting and checkered politics and policies are yet to yield a measure of sustained economic stability. Under ex-president Rafael Correa tenure from 2009 through 2017, the country’s oil and gas industry operated under service contract agreements. Though nationalistic in that upside from production is wholly owned by the government, it restricts investment and strategy opportunities for oil and gas companies, who are paid cost recovery plus for services. Ex-President Rafael Correa was also ousted out of office in 2017, over a 5-year infrastructure corruption scandal. In combination with depressed market conditions between 2014 to 2017, Ecuador’s economy headed into a recession. Former president Linen Moreno entered office from September 2018 and created a more liberal the oil and gas market using production sharing agreements (PSA). This effort to jumpstart economic growth occurred in conjunction with other government strategies including the country’s decision to withdraw from the Organization of the Petroleum Exporting Countries (OPEC) on January 1st, 2020, to improve its economic standing, remove the production quota burdens and other fiscal concerns.
Map of oil and gas fields in Ecuador
The country’s economy slumped further in 2020 due to the reduced demand and low oil price environment induced by COVID-19 pandemic and damage done to the privately owned Oleoducto de Crudos Pesados (OCP) pipeline and the state-run Transecuatoriano’s Sistema Oleducto Trans-Ecuatoriano (SOTE) pipeline in April 2020. The damage was triggered by a landslide in the Amazon region and caused a 3-month temporary shutdown where oil production declined roughly 8.8% over 2019 levels. Newly elected President Guillermo Lasso inherited this situation when he began his new term in April 2021. His focus as with the previous administration, continues to be stimulating the economy through increasing the fiscal incentives to private oil and gas companies inviting foreign investment. President Lasso will continue to incentivize investment and participation through PSA’s, renegotiation of existing service contracts while proposing risk sharing agreements (RSA) to boost production from brown and greenfield projects. Additionally, the new president has called for tighter environmental reviews that can affect oil and gas activities. National oil company EP Petroecuador has a drilling campaign planned in the Yasuni National Park in the Amazon region. The campaign at the Ishpingo-Tambococha-Tiputini (ITT) complex will see 80 wells drilled total, 72 in Ishpingo and 8 in Tambococha through 2022.
Ecuador relies on a combination of hydroelectric power and oil-fired plants for domestic power generation. Considering global carbon initiatives and diversifying power supply especially climate change effects on water supply for hydroelectricity, the government is developing gas-fired facilities. However, there have been no significant discoveries in Ecuador, likely owing to the limited exploration activities, to support supply for growing local demand. The country minimal and declining natural gas production, mainly from the offshore Amistad field. To increase supply, Ecuador has secured its first LNG import terminal with construction carded for 2021. The Floating Storage Regasification Unit (FSRU) owned in partnership by Sycar LLC and an LNG trading firm received final environmental approval from the Ecuadorean Ministry of Environment and Water on April 19th, 2021.
There are 3 onshore planned and announced projects anticipated to come online between 2020 and 2025. Located in the Oriente Basin, planned projects Ishpingo and Oglan are heavy oil fields with first oil in 2022 and announced project Chanangue, is a conventional oil field, carded to come online in 2023. The largest of the 3 projects, Ishpingo is owned 100% and operated by Petroamazonas Ep and peaks in 2023, contributing 43,765 bd of 14o API crude oil. Olgan, the second largest project operated by Pluspetrol Ecuador BV with 100% equity peaks in 2023 at 38,945 bd with 16o API crude oil. Together, Ishpingo and Oglan make up 14% of Ecuador’s total crude oil and condensate production in 2023 and 37.7% of heavy oil production. Conventional oil project Chanangue is 100% owned and operated by Gran Tierra Energy Inc. And is a smaller development estimated to produce 2,845 bd of crude oil and 0.85 mmcfd of natural gas by peak in 2027.
In November 2021, the Ecuadorean government authorized a deal between Repsol SA and New Stratus Energy Inc. in an asset transaction that includes 13 upstream fields in Blocks 16 -IRO and Block 67 – Tivacuno. The deal originally announced on October 20th, 2021 though a letter of intent (LOI), has a deal value of US$17 million for upstream fields averaging 6,200 boed net to the buyer as well as midstream assets. The deal will see Repsol divest their 35% share in the mature heavy oil producing fields where Block 16 peaked in 2006 and Block 67 peaked in 2007. This transaction is in line with the trends of integrated oil companies streamlining their portfolio, divesting non-core assets as strategies shift to capital efficiency, high margins, and diverse investments.
New Stratus Energy seeks to invest US$200 million in 2022 and 2023 on the assets with a 30-well drilling campaign to boost production up to 25,000 bd. This plan is contingent on the approval to change the existing services contract to a PSA that extends the contract for 15 years. Without the PSA, New Stratus Energy intends to relinquish the assets to the state for a cost of US$15 million. President Lasso has committed to supporting the oil and gas sector and given the current service contract expires in December 2022 and the government is in arrears for fees on the blocks amounting to roughly US$120 million, it is likely that they will be open to negotiations. The government however will face heavy scrutiny from environmentalists as it relates to activity in this sector.
With the aim of increasing production to 1,000 mbd by 2025, the Ecuadorean government has revealed its intention for a slate of new bidding rounds. An announcement was made in November 2021 by Juan Carlos Bermeo, Minister of Energy where 7 projects were identified with an investment price tag of US$19 billion to boost the countries economy. The upstream investment opportunities include the Intracampos II Round, the Sacha tender, the Southeastern Round and the Intracampos III Round. The Intracampos II Round in Northern Ecuador for exploration and exploitation activities is anticipated to yield production increase up to 22,000 bd of crude oil with a US$ 732 million investment. Sacha in Block 60 has a capex investment of US$2,887 million over a 24-month period, like the Intracampos II Round. The main gas field in Ecuador, Amistad in the Gulf of Guayaquil is also under consideration for re-development. The official tender announcement is pending as the government reviews hydrocarbon laws to increase the countries attractiveness.