Fifth largest oil producer in South America – Analysis – Eurasia Review


In 2020, Ecuador was South America’s fifth-largest oil producer behind Brazil, Colombia, Argentina and Venezuela.

Oil and other liquids accounted for 62% of Ecuador’s total energy consumption in 2020. Hydroelectric power was the second most important source of energy. Natural gas and other renewable fuels make up the rest of Ecuador’s energy mix.

Oil and other liquids

Reserves

As of January 2021, Ecuador had 8.3 billion barrels of proven crude oil reserves. Ecuador’s oil reserves are the third in Latin America, after those of Venezuela and Brazil.1 Most of Ecuador’s oil reserves are in the Oriente basin located in the Amazon.

Exploration and production

The Ecuadorian government’s initiatives to increase the country’s share of crude oil revenues have created a difficult investment environment. As a result, crude oil production remained relatively stable between 2010 and 2020. In addition, production continued to be limited due to declining production by private companies as well as limited investment in exploration and development. production from the new fields operated by Petroamazonas (Ecuador’s national oil company, now called Petroecuador).2

The vast fields of Ishping-Tambococha-Tiputini (ITT) are located in the Amazon region and have been the subject of protests from environmental groups and indigenous communities. As a result of these protests, as well as social unrest and attacks by indigenous groups on oil infrastructure, private companies have suspended operations or restricted their participation in oil production activities in ITT fields in recent years. , contributing to the stagnation of production growth.

Ecuador produced 483,000 barrels per day (b / d) of oil and other liquids in 2020, up from 534,000 b / d in 2019. In April 2020, a landslide in the Amazon region damaged the Sistema Oleducto Trans-Ecuatoriano de Transecuatoriano (SOTE) and the private Oleoducto de Crudos Pesados ​​(OCP) pipeline, forcing a case of force majeure. Damage to the pipeline disrupted crude oil production, and about 60% of production was disconnected in April. Production was not fully restored until June. Petroecuador and OCP Ecuador subsequently constructed bypasses for these two pipelines to avoid further disturbances in this landslide-prone area.

The global COVID-19 pandemic has also contributed to a decline in crude oil production in 2020. The introduction of COVID-19 containment measures has disrupted operations in oil-rich regions of remote eastern provinces of Ecuador and travel restrictions have reduced domestic demand for refined products. .

Ecuador withdrew its membership of the Organization of the Petroleum Exporting Countries (OPEC) effective January 1, 2020. According to Ecuadorian government, the country’s decision to withdraw its OPEC membership was part of the government’s rigorous plan to cut public spending, promote public-private partnerships, and implement more market-friendly economic policies that generate new income.3

Exports and Imports

According to Global Trade Tracker, Ecuador exported 360,000 b / d of crude oil in 2020. The country is heavily dependent on oil export earnings; in 2020, Ecuador exported more than 70% of the crude oil it produced. Crude oil exports accounted for 49%4 the country’s export earnings5 and 21%6 in public sector revenue in 2019. The country’s oil export earnings in 2020 have likely halved due to falling global oil prices due to the effects of COVID-19 lockdowns as well as the disruption national oil companies due to the closure of SOTE and OCP pipelines.7

In 2020, the United States received most of Ecuador’s crude oil exports, averaging 169,000 b / d, or 46% of total exports. Chile, China and India were among the top export destinations for Ecuadorian crude oil. Ecuador was the second largest source of foreign oil for the West Coast of the United States (PADD 5) in 2020, behind only Canada.8 Therefore, Ecuador is a regionally significant oil source for the west coast of the United States, which is isolated from other parts of the continental United States due to a few onshore pipelines.

Due to insufficient domestic refining capacity to meet local demand, Ecuador is an importer of petroleum products, despite its production of crude oil and petroleum liquids. In general, Ecuador exports heavy refined products, such as fuel oil, and imports lighter products, including gasoline, diesel, and liquefied petroleum gas (LPG).

Pipelines

Ecuador’s pipeline infrastructure is old and its available capacity is not fully utilized. Ecuador has two major pipeline networks. The oldest and most widely used pipeline is the 310-mile SOTE, which carries light to medium crude oil (Oriente crude). Ecuador’s second pipeline is the OCP, which transports medium and light crudes separately from heavy crudes (Napo crude).9 About 70% of the country’s crude oil passes through SOTE and the rest through OCP.

Ecuador has a transnational pipeline, the 190-mile Oleoducto Transandino (OTA) pipeline. The 20,000 bpd OTA pipeline connects Ecuador’s oil fields to the port of Tumaco in southern Colombia.ten

Natural gas

Reserves

According to Oil and Gas Journal, Ecuador had approximately 385 billion cubic feet (Bcf) of proven natural gas reserves as of December 2020.

Production

Ecuador produces relatively small volumes of natural gas. The EIA estimates that the country’s natural gas production remained stable at 12 billion cubic feet in 2020. Ecuador’s low natural gas production is mainly the result of a lack of infrastructure needed to capture and market natural gas.

The production of natural gas in Ecuador receives very little investment. The EIA expects the only unrelated natural gas field, the Amistad offshore field, to experience a drop in production given the maturity of the field and the lack of sufficient infill drilling. As of February 2021, no natural gas drilling rigs were being drilled in Ecuador, according to data from Baker Hughes.11

Imports

According to media reports,12 Ecuador is considering a liquefied natural gas (LNG) electricity production project, as domestic production of natural gas will remain insufficient to meet domestic demand. The project will include a small-scale floating LNG terminal and a floating storage and regasification unit (FSRU), which would supply up to 50 MMcf / d to the Thermo Gas Machala natural gas power plant in El Oro province.13,14 In February 2021, the American company Sycar obtained authorization to market LNG in Ecuador. The project is expected to go live in 2022.15

In 2020, Ecuador produced 31 billion kilowatt-hours (kWh) of electricity. More than 200 power plants are operating in Ecuador, 89 of which feed the national interconnected grid.

Hydropower accounted for 79% of the country’s electricity production in 2020. Most of Ecuador’s existing hydropower capacity is located in Azuay province in the south-central highlands. In recent years, the launch of several large facilities has reinforced the prominent role of the hydropower sector in Ecuador’s power generation mix.16 The other main source of electricity supply is conventional oil-fired thermal power plants.

Ecuador’s heavy use of hydropower for power generation makes the country’s power sector vulnerable to droughts and low water levels during the dry season, which runs from October to March. . To compensate for this, Ecuador currently relies on oil-fired power plants for the supply of non-hydroelectric power. The government plans to convert old oil-fired power plants to natural gas power plants not only to meet electricity demand, but also to reduce costs and emissions. Although natural gas power generation has the potential to become a stable complementary source to hydropower sensitive to drought and erosion, Ecuador’s lack of natural gas supply is preventing the expansion of the country. short-term sector.

Ecuador has transmission grid interconnections with Colombia and Peru, and the country is a net importer of electricity. The government is prioritizing improvements in the transmission and distribution sector, which should reduce future challenges to the development of energy and renewable projects and allow Ecuador to export more electricity.17 The residential sector accounts for about a third of total electricity consumption, as does the industrial sector.18

Ecuador’s non-hydropower renewable energy sector is relatively small, contributing around 3% of total electricity production in 2020.19 Government policy to increase penetration of the wind and solar markets may result in increased production of non-hydropower renewables. Some recent projects include the development of the 200 megawatt (MW) El Aromo solar photovoltaic project and the Villonaco II and III wind projects (46 MW and 56 MW, respectively).20 The start-up schedule for these projects is uncertain as tenders have been twice delayed due to the COVID-19 pandemic.

Remarks

  • The data presented in the text are the most recent available in September 2021.
  • Data are EIA estimates, unless otherwise noted.

End Notes

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