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Latin America Investment News on Viva Tropical

Private Companies Missing out on Ecuador’s $1 Billion Oil Business

Article Summary:

Mature oil fields in Ecuador are part of the country’s crown jewels, but legal mumbo-jumbo keeps private companies out of the bidding war, missing out on a $1 billion dollar business.

Photo Credit: America Economia

Original Article Text From America Economia via Google Translate :

Ecuador: Loopholes Difficult Signing Contracts with Private Oil

The lack of tendering and procurement figure for specific services would be illegal in the process of signing contracts with private companies for incremental oil production in the fields Shushufindi and Libertador.

These fields, part of the so-called ‘crown jewels’, will now be operated by the consortium Shushufindi SA, composed of French Schlumberger (60%), Argentina’s Tecpetrol (25%), US-based KKR (15%) and Pardaliservices, formed by Tecpetrol in a 40%, the Canadian Canacol (25%), Schlumberger (20%) and Ecuadorian Sertecpet (15%).

The oil analyst, Luis Calero, said incremental production operations are the way to optimize these mature fields.

However, certain events have occurred irregularly, as explained there has been no bidding process, but direct submission of bids. This practice is not convenient for the country, because in order to choose the best deal, the legislation required to be made public competitions and invitations.

The former union leader, Fernando Villavicencio, said the works contract, specific goods and services have been changed “arbitrarily” by Minister Wilson Pastor, by adding the word “integrated.” The nature of what is signed is the exploration and exploitation of oil.

Neither additional exploration or enhanced recovery, which are covered by the contract, as they are specific services.

Thus, under Article 6 of the Law of Hydrocarbons, who must have signed contracts is the oil ministry and Petroecuador, before an international bidding process is issued.

Indeed, during the presentation of conventions firms representing U.S. $ 1,678 million investment in 15 years, Shepherd explained that the Shushufindi is compromised exploratory drilling in the precretáceo in the second year of the contract.

“To give results could change the whole industrial phase of the industrial phase of oil,” he said.

The precretácico is a layer of soil where it is suspected that oil reservoirs. To get there you must drill to five kilometers deep, the current (Cretaceous) is located three kilometers.

For Calero, it is unclear which entity will operate the fields. Although, in Petroecuador clauses says he still operates, who makes the decisions and has the prominence it is the contractor must defend their investment.

He added that the privatization model is not a mature field, but does provide a strong private sector presence.

From the institutional, Petroecuador is not good being displaced in a supporting role. Perhaps in the end be fiscally beneficial. The analyst believes that this policy is at odds with the nationalist position to be shown, and as others, this government has acted pragmatically.

Link to Original Article:

From America Economia

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