CNPC to join Petroecuador in Ecuador Refinery project
The giant China National Petroleum Company (CNPC or PetroChina) is currently in discussion with the national oil companies (NOCs) Petroecuador and Petroleos de Venezuela SA (PDVSA) to take a stake in the Ecuador Refineria del Pacifico project.
With a production of 500,000 barrels per day (b/d), Ecuador is the smallest member of the producing countries cooperating under the OPEC organization.
By comparison Ecuador production represents one sixth of Venezuela.
The national company Petroecuador is operating three refineries:
- Esmeralda, in the eponym region, is the largest one with 110,000 b/d capacity
- La Libertad, along the southwest Pacific Coast
- Amazonas, in the Shushufindi region, in the northeast of Ecuador, is the smallest one.
Over the last years, Ecuador had to face a couple of challenges with these refineries that require now heavy investments.
Built in 1977, these refineries are aging and cannot run at their nominal capacities.
In parallel, Ecuador production has turned more and more to heavy crude oil as many other countries after the maturation of the conventional oil fields firstly developed 30 years ago.
In addition the domestic consumption of refined fuels is increasing constantly with the development of the country.
As a result, Ecuador is no longer able to refine its own crude oil and must import refined fuels.
Even if the export of crude oil represents 35% of the Ecuador Government budget, the import of expensive refined fuels compromises the trade balance of the country.
In order to help each other between political allies, Ecuador and Venezuela made a deal in 2008, to facilitate the refining of the Ecuador crude oil in Venezuela.
Unfortunately since this agreement was signed, Venezuela faced also some difficulties to maintain its full refining capacities, especially to treat heavy crude oil.
Thus, 53% of the refined fuels shipped from Venezuela back to Ecuador were in fact traded from third party countries such as Saudi Arabia.
Despite the quality of the relationships between the two countries, such model on the supply side cannot last too long.
Ecuador to revamp and upgrade old refineries
On the demand side, Ecuador signed in parallel an oil advance sales agreement with PetroChina.
According to this agreement, PetroChina paid $1 billion as down payment on the shipment of 69.12 million barrels due in the period 2009 – 2010.
As a consequence of this agreement, while the Ecuador export of crude oil was 55.5 million barrels on the first six months of 2012, PetroChina was quadrupling its share from 17% to 69% of these exports on the same period.
In this context and with the financing support from China, Ecuador is planning to invest:
- $750 million to revamp and improve energy efficiency of the Esmeralda Refinery
- $600 million to upgrade the Esmeralda Refinery with high-quality and low sulfur content products
- $800 million to overhaul the Amazonas Refinery
To be located close to Rio Manta in the Manabi province of Ecuador, the Refineria del Pacifico is designed to treat 300,000 b/d of crude oil, from light to heavy crude oil.
From the original project, the petrochemical complex to be built downstream the refinery has been reduced in order to contain the whole greenfield refinery and petrochemical complex in a budget of $10 billion capital expenditure.
Petroecuador awarded Refinery PMC to WorleyParsons
- Petroecuador holds 51% and is the operator
- PDVSA owns 49%
But in the context of the relationships described above between Petroecuador, PDVSA and PetroChina, the partners have opened discussions to allocate 30% of the Refineria del Pacifico project to PetroChina.
With this program, Ecuador is targeting to ramp up its crude oil production to 530,000 b/d.
The production of refined products should go for 45% to the domestic market for transportation fuels and to supply the feedstock of the petrochemical complex.
The remaining part should be exported.
- Future engineering, procurement and construction (EPC) contracts.
Currently the Brazilian engineering company, Odebrecht is already at work to prepare the construction site.
After more than $500 million capital expenditure already invested in the Ecuador Refinery project, Petroecuador and PDVSA expect to close the deal with PetroChina in coming weeks, in order to start production in 2016.