Significance: With the forced liquidation of Río Napo by the Ecuadorean authorities, Pdvsa has been effectively dumped, as Petroamazonas, which holds a 70% stake in the joint venture, seeks to partner with new cash-rich operators to boost output at the mature Sacha field, its second largest. The announcement puts an end to one of the most important pieces of the bilateral energy integration plan announced with tremendous fanfare eight years ago by Ecuador’s President Rafael Correa and his-then principal ally, Venezuela’s late former president Hugo Chávez (1999-2013). The move is indicative of the severe liquidity problems faced by both state firms, which urgently need to boost output to offset weaker international oil prices. With the Venezuelan government committed above all to ensuring that Pdvsa does not default on its sizeable debt, and as such withholding on all other commitments, the Correa government appears to have opted for pragmatism over politics.
• The decision was a year in the making. In July 2015, Ecuador’s companies’ superintendence declared Río Napo “inactive” for failing to submit any accounts since 2013. In April 2016, the superintendence ruled that it be liquidated. Pdvsa sought to contest the decision. Ahead of that, in mid-February, it was reported that Petroamazonas was negotiating with five potential new operators to boost crude output at the Sacha field.
• The Río Napo joint venture has been producing 72,000 barrels per day (bpd) on average, but earlier this year Poveda told international media that Ecuador wanted to hire a new operator capable of injecting US$2bn into the field. “Ecuador is seeking a more efficient operating alternative, fresh investment and new technologies for Sacha” the minister stated. Poveda was also clear that Río Napo would not be part of the new management model, but declined to comment on the future of the joint venture with Pdvsa.
• Notably, ending the joint venture and securing a new partner for Sacha will relieve Petroamazonas of the financial burden of paying a sizeable annual fee to Río Napo for running the field. According to a report by the industry specialist Argus Media, in 2015 Petroamazonas paid around US$$167m to Río Napo, “equivalent to 13% of the company's operating expenses”. With the liquidation, Pdvsa loses all of the investment it put into Río Napo, which it cited at US$305m since 2008. Pdvsa also noted that it had paid US$173.5m in income tax in Ecuador in 2012-2015. The company said that the decision caused it “grave and irreparable damage”.
Looking Ahead: Poveda has hinted that Petroamazonas is seeking to ink a deal similar to that agreed with the international oil services firm Schlumberger in December 2015 to boost production at the 70,000 bpd Auca oil field. Under the terms of that deal, Schlumberger agreed to invest US$$4.9bn over 20 years to boost Auca’s production by 20,000 bpd. US oil service firm Halliburton reportedly is one of the front runners for the new Sacha field contract.
End of preview - This article contains approximately 540 words.
Subscribers: Log in now to read the full article
Not a Subscriber?
Choose from one of the following options
