BMI View: Ecuador's upstream sector will experience very modest growth over the remainder of the decade, but its downstream sector is likely to shift to net exp orter status by 2019. We hold a modest growth outlook for the country as a result of limited upstream prospects amid a lower oil price environment, coupled with continued uncertainty regarding the future of Ecuador's largest untapped oil field
|e/f = BMI estimate/forecast. Source: EIA, BMI|
|Crude, NGPL & other liquids prod, 000b/d||527.2||557.1||568.2||579.6||588.3||594.2||606.1|
|Refined products production & ethanol, 000b/d||157.8||142.0||127.8||153.4||154.1||262.0||393.0|
|Refined products consumption & ethanol, 000b/d||255.1||265.2||275.2||285.4||296.0||305.6||314.8|
|Dry natural gas production, bcm||0.9||1.1||1.3||1.3||1.3||1.3||1.3|
|Dry natural gas consumption, bcm||0.5||0.5||0.5||0.6||0.6||0.6||0.6|
The key trends and developments in Ecuador's oil and gas sector are:
Oil production will grow through 2018 from continued efficiency gains, but will be incremental, offset by natural depreciation rates at the country's mature fields. Moreover, a poor above ground environment, including unattractive contract terms and an uncertain regulatory environment, acts as a significant deterrent to greater foreign investment.
Recognising a deficit in investment, Ecuador is hoping to improve its image and its options by reaching out to China, which is the largest foreign investor in the country's petroleum sector..
An international oilfield consortium is spending USD2.1bn over the next five years to boost oil recovery rates from 17 mature oil fields. In October 2014, Petroamazonas reached a long-term, USD1bn agreement with Halliburton to proved field and project management and drilling services across nine mature fields over the next five years.
A degree of uncertainty hangs over the country's largest untapped resource field, the Pungarayacu ultra heavy crude field. Estimated to contain between 4bn and 12bn bbl in place, the Canandian firm Ivanhoe Energy has been shown the door by Ecuador after six years of unfulfilled promises to liquefy the crude and commence production. Ivanhoe had promised to raise USD5bn to develop the field, but was only able to raise USD90mn to support the development.
While we maintain our modest outlook on long-term production growth, recent events suggest risks lie to the upside. Namely, the Ecuadorian government has authorised drilling in the country's Ishpingo Tambococha Tiputini (ITT) complex. However, a well publicised campaign by local and international NGOs has kept most international oil companies from expressing great interest.
With respect to gas, what little activity there is remains centred around bolstering output from Block 6 in the Gulf of Guayaquil. While there has been some investment into further exploration, and we have factored in gains from associated production, we believe that production of natural gas will remain minimal such that output will begin to slip toward the mid-point of our forecast period.
Ecuador is growing increasingly reliant on Chinese financing amid a lower oil price environment. China and Ecuador have reportedly come to terms on a funding agreement that will launch construction of the Refineria del Pacifico, which will add 300,000b/d in refined output by 2019. Given the strengthening of this accord in January 2015, we feel confident enough to add this capacity to our refining forecast.