Ecuador loses US$600 million due to suspension of crude oil transportation

RIO DE JANEIRO, BRAZIL – Ecuador registers some US$600 million in losses due to the suspension of oil transportation through two oil pipelines because of soil erosion caused by a river, informed today the Ministry of Energy.

The state-owned Petroecuador, in charge of the Trans-Ecuadorian Oil Pipeline System (SOTE) and a polyduct, and the private consortium Oleoducto de Crudos Pesados (OCP), are building variants of their pipelines to avoid “greater economic impacts, which at the moment are estimated at US$600 million”, the ministry said in a statement.

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Due to progressive erosion, the country paralyzed a week ago the operations of the pipelines that connect the wells in the Amazon jungle with a port on the Pacific. Another serves to transport fuel to Quito.

According to the Energy Ministry, total oil production fell to about 137,000 barrels per day (bd) as of Wednesday, down from 165,000 bd the previous day.

The portfolio added that despite the suspension of fuel transportation, its supply is “guaranteed on a national scale.”

The SOTE, the polyduct, and the OCP suspended pumping due to erosion caused by the Coca River (east of Quito), affecting the Piedra Fina sector in the Amazonian province of Napo pipeline pass.

The gradual erosion, detected in February 2020 after the collapse of a waterfall located between the provinces of Napo and Sucumbíos, led the Ecuadorian government to declare force majeure for oil companies that hold contracts under the service provision modality in the country to avoid punishment for non-compliance.

This clause allows the suspension of specific commitments when an unforeseeable situation occurs that causes obstruction or delay in fulfilling the obligations established in the contracts.

According to the Central Bank, Ecuador, whose dollarized economy depends on oil – its main export product – exploited 495,000 bd between January and October, most of it in charge of the state-owned Petroecuador.

Sales reached 343,035 bd (69%) at an average price of US$61.41 per barrel, generating some US$6.4 billion. The Andean nation estimated production of around 493,000 bd for December.

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