Ecuador, New Opportunities Arise

PROMOTION // ECONOMIC DEVELOPMENT

ECUADOR NEW OPPORTUNITIES ARISE

Bidding round for hydrocarbons set to boost exploration and foreign investment 2013 promises to be a milestone year for the Ecuadorean hydrocarbons industry. The new bidding round—called Ronda Suroriente Ecuador, or Ecuador Southeastern Round—for oil blocks in the country’s southeast will begin on November 28, 2012, with tendering scheduled for next May and contracts expected to be inked in the third quarter of the year. With 13 blocks up for offer, a new era of exploration is about to begin in Ecuador.

“We did not explore enough in the last 15 years,” admits Wilson Pástor, the country’s Minister of Nonrenewable Natural Resources. “The last bidding process was in 1995. Reserves are in remission and our challenge is to attract foreign investment.”

Doing so should not prove too difficult a task, with an estimate of between 370 million and 1.6 billion barrels of reserves ripe for discovery in the area, according to studies carried out by the French Institute of Petroleum and Ecuadorean experts.

Only three blocks on offer hold proven reserves, amounting to just over 100 million barrels, with 2-D seismic data carried out on 12 of them.

PROMOTION 2 // ECUADOR

HYDROCARBONS SECRETARIAT: The Industry’s Partner in Development The Hydrocarbons Secretariat of Ecuador (SHE) was established in July 2010 as the entity in charge of the country’s oil and gas resources, and it serves as the industry’s partner for development. Its responsibilities include negotiating, amending and administering contracts; offering technical, financial and legal support; and analyzing and quantifying Ecuador’s existing and undiscovered assets.

Led by Hydrocarbons Secretary Andrés Donoso Fabara, a lawyer by training with extensive industry experience, the Secretariat has its hands full for the next few years, overseeing the reorganization of state-owned companies and financing projects like the Refinería del Pacífico. Efficiencies gained and extra revenue generated will be used to reduce the country’s fuel subsidy below 2011’s $2.5 billion.

The Secretariat is also in charge of promotion to attract regional and overseas capital to the sector, including the organization of bidding rounds for new leases. Among the projects on its agenda are the reinforcement of the Ecuadorian Oil Data Bank (BIPE), including 2-D and 3-D seismic data, well logs and geographical information. It aims to provide the industry with a one-stop source of knowledge to facilitate decision making and investment.

At the same time, SHE will conduct studies to evaluate potential resources, exploring more than 67,000 square kilometers off the coast of five provinces to map the whereabouts of an estimated 1 billion barrels of crude. And in 2013, it will begin a study for nonconventional shale deposits onshore and offshore.

ECUADOR’S OIL CONCESSIONS

COLOMBIA

Quito

VENEZUELA FRENCH

GUYANA GUINEA SURINAME

COLOMBIA

BRAZIL

PERU

BOLIVIA

PARAGUAY

URUGUAY CHILE

CORPORATE PROFILE

ARGENTINA

PERU

Ecuador’s Southeastern Round: The orange area represents the 13 oil blocks up for licensing.

Ecuador’s Hydrocarbons Secretariat (known as SHE) is the entity overseeing the Ecuador Southeastern Round. Set up in July 2010 under the terms of the July 2010 Hydrocarbons Law, SHE is responsible for the nation’s hydrocarbon resources, including the administration and amendment of contracts.

“The Secretariat will guide investment in the oil and gas business in Ecuador,” says Hydrocarbons Secretary Andrés Donoso Fabara. “SHE is the equivalent of Colombia’s National Agency of Hydrocarbons (ANH) or Brazil’s National Agency of Petroleum, Natural Gas and Biofuel (ANP). The message we want to convey is to present ourselves as partners. Our position is to help investment in the sector.”

Minister Pástor expects investment in each of the blocks up for bidding to reach as much as $200 million.

Approximately three-quarters of the blocks will be available to international oil companies, while the remainder will be reserved for state-owned operators from neighboring nations and Ecuador’s own Petroamazonas.

Once it begins to flow, oil from the southeastern blocks will have a fasttrack route to markets, thanks to an agreement signed this August between

Peru and Ecuador. Operators will have access to the North Peruvian Pipeline to ship crude to the Pacific Coast. Minister Pástor called the deal, which will cost Ecuador an estimated $10 per barrel, “true energy integration.”

After a couple of years of uncertainty in the industry, Ecuador has rewritten the rules of engagement. The country’s new Constitution, passed in 2008, declared oil a strategic asset subject to state control, changing the playing field for private-sector organizations. At the time, foreign-owned firms produced 44% of the nation’s output.

Under the recent hydrocarbons legislation that Minister Pástor helped push through, the state owns 100% of production and is paid the first 25%

of income from sales. The decision was also made to replace existing production-sharing contracts (PSCs) for service contracts, with a flat fee paid per barrel produced, which could be easily calculated as conditions and costs were clear.

Ronald Zak/ /AP/Corbis

PROMOTION 3

Q&A WITH MINISTER WILSON PÁSTOR

Political stability, exploration opportunities and a welldefined framework for business has led to a resurgence of interest in Ecuador’s oil sector.

“With PSCs, we did not control the price, and that has been increasing at a very high rate in real terms,” the Minister explains. “This generated an imbalance in the share of profits. The government wanted to stabilize this and fix a price that would represent the real conditions of the field and production.”

A deadline for renegotiation with majors was set for November 2010, with smaller companies given until January, at the risk of forfeiting fields, subject to compensation, if deals could not be reached. By the end of the process, 14 of the previous 21 contracts were signed, providing operators with an average 15% rate of return at a tariff per barrel of just over $32.

At present, Ecuador produces about 510,000 barrels per day (bpd) and has proven reserves of around 3.5 billion barrels, according to official data. Minister Pástor expects output to increase by 4.7% to 526,000 bpd next year, rising to 530,000 by 2014.

The combination of political stability, exploration opportunities and a well-defined framework for business has led to a resurgence of interest in Ecuador’s oil sector, fueling a climate of confidence ahead of the Ecuador Southeastern Round. More than $1.4 billion in investment has already been committed across the sector over the next three years.

Ecuador Section Project Managers: Eduardo Magaña and Maria Cristina Nadolu For more information, contact: Gabriel Gutierrez – g.gutierrez@forbes-cm.com www.forbescustom.com/ecuador All statistical data as stated was provided by the sponsors of this report.

A look at the future of Ecuador’s oil industry In a recent interview for this report, Ecuador’s Minister of Nonrenewable Natural Resources, Wilson Pástor—a well-respected hydrocarbons professional with more than three decades’ experience in the sector—spoke about the future of the country’s oil industry. Pástor has held a variety of public- and private-sector roles, in addition to working as a consultant for the World Bank, and is a prolific author on Ecuadorean oil issues. The discussion focused on the issues facing Ecuador’s oil industry in the years to come. The following are some of the highlights of that conversation.

ON FUTURE PROSPECTS “I see two lines of development: The first is to increase exploration; the second is to improve oil recovery with enhanced techniques. We have signed important service contracts with some of the best-known companies, like Schlumberger, and are going to extend this for other fields. This

“I see two lines of development: The first is to increase exploration; the second is to improve oil recovery with enhanced techniques.”

approach, however, has limits, as we can only improve so much. The only solution is to increase investment in exploration and improve the recovery of reserves.”

ON PLANS FOR STATE-OWNED COMPANIES “Achieving efficient costs depends on the situation of Petroecuador and Petroamazonas. We consider Petroecuador a more powerful company downstream that can operate not only in Ecuador, but internationally in countries like Peru. On the other hand, Petroamazonas, which has better international practices, will take over exploration and be in charge of upstream.”

ON EXPORT PRODUCTION “Ecuador is now net-exporting yearly around 120 million barrels, approximately 60% of our production. As internal demand grows in the medium term, by the end of the decade we might not be exporting.

This is due not only to field slowdown and decreasing reserves, but also to the new refinery, Refinería del Pacífico, which will produce 300,000 bpd. My vision is optimistic, however, as we have reserves that are not yet developed. This is very heavy oil, and some companies would like to invest and produce up to 200,000 bpd by applying a new technique using nitrogen.”

PROMOTION 4 // ECUADOR

TRANSFORMING POLITICAL WILL INTO LEGAL GUARANTEES

inalienable and absolute assets, subject to no statute of limitations.” Subsequent articles deal with the strategic nature of resources and the state’s exclusive powers over hydrocarbons, including those in its territorial waters.

“Since President Rafael Correa has been in power, Ecuador has had the longest stability in many years,” says David R. Martin, the CEO of Gente Oil Global and a 50-year veteran of the international oil industry. “This means we have an administration working with Congress and coming up with laws and regulations that are clear—all made possible because of political stability.”

Among the raft of legislation the Correa government has passed since taking office in 2007, the new Constitution of 2008 and reforms to the 1978 Hydrocarbons Law in July 2010 represent the clearest expressions of the administration’s intent to ensure that Ecuador’s riches are exploited to the benefit of the nation.

Article 1 of the Constitution specifically states, “Nonrenewable natural resources in the state’s territory form part of its

The 2010 amendments to the Hydrocarbons Law, which was originally passed in 1978, encompass the state’s responsibility for exploration and production, joint ventures, agreements with overseas state-owned oil companies, and the bidding process for leases, overseen by the Committee for Hydrocarbon Tenders.

The reform also lays out the rules for private-sector participation in cases

CORPORATE PROFILE

ENAP SIPEC IN ECUADOR: A Success Story ENAP Sipec Ecuador, a subsidiary of the Chilean stateowned company ENAP SIPETROL, began its operations in Ecuador in 2003 after Chile and Ecuador signed agreements for energy-sector cooperation, particularly in hydrocarbon exploration and development.

Established in 1990, ENAP SIPETROL develops hydrocarbon exploration and production activities in foreign countries, taking advantage of ENAP’s professional and technical teams in search of new business opportunities outside Chile. At present, it is active in production in Argentina, Ecuador, Egypt and Chile.

Shortly after its establishment, ENAP Sipec began to develop two oil fields—Paraiso, Biguno, Huachito (PBH) and Mauro Davalos Cordero (MDC)—boosting production to a peak of 22,000 bpd by applying 3-D seismic technology, putting in place a drilling program and building new facilities.

Ten years later, having invested more than $230 million, ENAP Sipec has extracted over 50,000,000 barrels of oil from PBH and MDC. More important, the company has implemented numerous social projects with native communities, focusing on health, education and sustainable projects. It is ISO 14001 certified and operates a reforestation program for native species.

Over the last two years, relations between Ecuador and Chile have improved and the Ecuadorean government

where SHE deems that state-owned companies do not have sufficient technological or economic means to explore or exploit certain areas. In these cases, SHE is the body responsible for signing contracts and ensuring that they are executed correctly.

The principles underlying Ecuador’s hydrocarbons policy are as follows: the preservation of national interests at every level of the industry; environmental respect and sustainability; guaranteeing supply; consumer protection; prioritizing technological development; promoting exploration; contributing to industrialization; attracting investment; developing scientific, technological and human resources; and improving the country’s competitiveness on a global scale.

Repsol YPF Ecuador, the local subsidiary of the Spanish hydrocarbons giant, is one of many major international organizations confident about the future of the industry in Ecuador: “We decided to continue operations here because there were clear rules to continue in the country,” says Managing Director Luis García Sánchez.

has developed new practices, including the renegotiation of contracts to adopt a new model, known as Service Contracts, which ENAP Sipec was the first to reach. ENAP Sipec also signed an agreement with Ecuador’s Minister of Nonrenewable Resources in November 2010, committing to new investments, such as an enhanced recovery project and exploration of a new area called Intracampos.

Consolidating these successes, in October 2011 the Ecuadorean government and ENAP Sipec signed a new Service Contract for Block 3J, located near the Gulf of Guayaquil. It is a huge exploration area that will bring great benefits to Ecuador, with fresh discoveries in a part of the territory that to date has been only partially developed. All this has been achieved, thanks to negotiations in which Ecuador and Chile share the same goal: to increase ENAP’s presence in Ecuador with greater investment and technology, and to harness potential development in reserves and production to provide direct benefits to Ecuador.

PROMOTION 5

Companies can enhance profitability by raising production or lowering operating costs.

The biggest change for privatesector oil companies working or planning to work in Ecuador has been the introduction of service contracts for exploration and production, rather than the production-sharing agreements more commonly used worldwide.

The latter expose companies to greater risk, but, once production begins, allow operators to offset capital expenditure before generating profit, at which point payments accrue to the state.

Soon after coming to power, in light of spiraling oil prices that benefited the companies more than the country, President Rafael Correa decreed that Ecuador should earn more from the

REGIONAL COOPERATION PAYS OFF FOR ALL CONCERNED Ecuador begins pumping Colombian crude, while Peru carries Ecuador’s oil to market Aside from extending exploration and increasing production at home, the domestic oil sector is looking to develop ventures and create synergies with its counterparts in neighboring nations. The administration already has deals in place with every country along the Pacific seaboard and aims to foster new relationships in both upstream and downstream activities.

La Empresa Nacional del Petroleo (ENAP), Chile’s state-owned giant, was the first overseas company to sign a new contract in 2010. The company pumps 14,500 bpd, and in August it celebrated producing 50 million barrels in under a decade. It has invested $230 million in Ecuador to date, and in 2011

exploitation of its crude. A 99% windfall tax was imposed, and then it was lifted following the 2008 financial crisis when prices plummeted to $30 per barrel, before his administration pushed forward with plans to alter existing agreements to pay privately owned producers a flat fee per barrel.

As a result of the shift—part of the reforms made to the Hydrocarbons Law in July 2010 and implemented via negotiations completed by the start of 2011—oil companies already active in Ecuador can make more money by raising production volume, using existing infrastructure or lowering operational overheads.

Minister Pástor explains the thinking behind the change: “We wanted to give companies a price that would be profitable, with the objective being a 15% rate of return. This is only for contracts in production. For new ventures, companies propose a tariff according to their estimations related to reserves and production,” he explains. “Because risk is involved, they can get up to 30% as a rate of return, so it is much more flexible and open.”

At the same time, for private-sector

it added Jambelí Block 3, located in the Gulf of Guayaquil, to its interests.

Petróleos de Venezuela, SA (PDVSA) has worked with Petroecuador in Ecuador’s Amazon region since 2009.

“Some $374 million will be invested in the Río Napo Operations joint venture next year to raise output to 80,000 bpd by 2015,” says Patricio Román, Río Napo’s general manager. In April, Petroecuador revealed plans to take a 14% stake in Venezuela’s Dobokuki field, where production should reach 50,000 in two years, according to Petroecuador General Manager Marco Calvopiña.

epa european pressphoto agency b.v. / Alamy

CHANGE TO CONTRACT MODEL FIXES RATES OF RETURN

President Rafael Correa

companies working with Petroecuador on its blocks, integrated service contracts have been put in place that allow global organizations like Schlumberger to provide investment, technology and know-how to optimize production, improve recovery rates and aid with exploration.

Rates of return on this kind of contract, fixed for a 15-year term, vary from 15% for optimization services to 25% for enhanced recovery or exploration.

Payment is made according to an established rate per barrel, subject to a base curve agreed upon by Petroecuador and the service provider.

the 475-kilometer Heavy Crude Oil Pipeline that runs from the Sucumbíos region to the Pacific. This could also be the first step toward a connection for both nations with Venezuela’s Llanos pipeline.

“The southeast of Colombia has huge reserves but lacks transportation,” explains Minister Pástor. “We have the OCP pipeline that has a capacity of up to 450,000 bpd. We are currently transporting only a third of this, so Colombia is interested in moving the oil they have through this pipeline.”

And this past August, Pástor inked a deal with Peru to connect pipe-

Pástor inked a deal with Peru to connect pipelines in a $300 million project to ship Ecuadorean oil to Peru’s Pacific ports.

In June, Oleoducto de Crudos Pesados (OCP), Ecuador’s pipeline company, announced that it would begin transporting 15,000 bpd of Colombian crude by the end of 2012, with the possibility of a tenfold expansion in three years. OCP operates

lines in a $300 million project to ship Ecuadorean oil to Peru’s Pacific ports.

The agreement opened the door for PetroPeru, the national oil company, to take part in Ecuador’s bidding round in November, as it plans to return to upstream activities.

PROMOTION 7

STATE-OWNED OIL GIANTS READY FOR REORGANIZATION Investments in innovative technology at heart of exploration and refinery initiatives Scheduled for completion over the next couple of years, the reorganization of Ecuador’s state-owned oil companies, Petroamazonas and Petroecuador, aims to reinforce each as a regional leader in its field. While Petroecuador will focus on developing downstream projects, Petroamazonas is set to capitalize upon both organizations’ experience in upstream activities.

By the end of the year, Petroamazonas plans to have drilled more than 90 new wells across the five fields it operates, as part of a $1.25 billion investment to expand its current output of 160,000 bpd. At the Oso 54 and 59 wells, located on the Napo and Orellana blocks, Petroamazonas began using a new multilateral drilling technique last August to boost production and limit environmental impact.

According to company sources, two branches will extend out from a single mother bore to cover a larger area and should start producing crude by November.

This approach has been used successfully in China, Venezuela and the North Sea and is 96% effective.

“Our operational and economic indicators show Petroamazonas has everything that an international oil company needs to face these projects,” says Oswaldo Madrid, the company’s general manager. “We have enormous strengths, because we have the highest international standards in the oil industry.”

For its part, Petroecuador is concentrating on developing the country’s pipelines, refineries, ports and trade to ensure that Ecuador remains well positioned in the downstream sector. Among the projects on its to-do list is the Refinería del Pacífico, a 300,000-bpd refinery scheduled to come into operation by the end of 2015.

A joint venture with Venezuela’s PDVSA, the $12 billion project is still at the financing stage. This August, Petroecuador began conversations with China National Petroleum Company (CNPC) about acquiring a stake in the new facility.

“Our challenge is to find a shareholder,” says Jorge Glas, Ecuador’s Minister of Strategic Sectors. “We hope to reach an agreement with CNPC, but if it doesn’t happen, we will look for another partner. Other companies are interested.”

TAKING COMMUNITIES AND CONSERVATION INTO ACCOUNT Managing resources to protect biodiverse region Wherever they operate in the world today, oil companies come under increasing scrutiny to ensure that they do not have a negative impact on the people and the places in which they work. While the world may demand an endless supply of cheap crude to fuel economic development, politicians and the public alike are no longer prepared to pay any price— either monetary or environmental—for petroleum.

Under President Rafael Correa’s leadership, the Ecuadorean government has clearly signaled its intent to protect environmental and human rights above the potential benefits it could accrue from exploiting its oil. With its Yasuní-ITT initiative, launched in 2007, the government proposed an indefinite halt to production at the IshpingoTambococha-Tiputini (ITT) field, located within Yasuní National Park. In exchange, it asked that the international community fund 50% of the deposit’s value.

ITT contains 846 million barrels, around 20% of Ecuador’s proven reserves, valued at $3.6 billion. The problem is where it lies: in one of the richest areas of biodiversity on the planet. Two acres in Yasuní contains more tree species than all of North America.

Leaving oil in the ground and trees in the forest will save more than 1,200 million metric tons of carbon emissions.

Ahead of the country’s Southeastern Round, which begins in November, the Ministry of Nonrenewable Natural Resources directed Ecuador’s Hydrocarbons Secretariat (SHE) to collect and analyze data from the Amazon provinces of Pastaza, Morona Santiago, Napo and Orellana to produce a socioenvironmental diagnosis of those areas that oil production activities would affect.

Adopting a holistic approach, SHE undertook a detailed survey of environmental parameters, including air quality, rainfall and climate data, noise pollution, hydrological resources, land use and ecosystems, to determine what kind of regulations would be required to maintain existing conditions.

At the same time, a process called Prior Consultation (Consulta Previa), which brought together local authorities and communities, included opportunities for dialogue by means of meetings and workshops to ensure that citizens’ rights were upheld and their opinions heard. The conclusions of the analysis have been used to inform public policy about how best to manage the region’s resources from a human and environmental perspective.

PROMOTION 8 // ECUADOR

CORPORATE PROFILE

Upstream Giant to Expand Exploration and Production The state-owned company Petroamazonas EP is responsible for Ecuador’s national exploration and production interests in the strategically important hydrocarbons sector.

Petroamazonas was set up under the Public Enterprise Act in April 2010 and was granted financial and management independence.

Petroamazonas operates Blocks 7, 12, 15, 18 and 21, and is working on the development of Block 31. Actual proven reserves are 300 million barrels, and, with 14 exploratory wells in its program, Petroamazonas EP is planning to increase reserves by an additional 100 million barrels in 2013.

At present, Petroamazonas produces 160,000 bpd, close to a third of total Ecuadorean oil production. Over the five-year period ending in July 2012, the company posted revenues in excess of $13.2 billion.

Petroamazonas is committed to exploiting its reserves efficiently, safely and sustainably, and its operations are ISO 9001, ISO 14001 and OHSAS

18001 certified. The company is also keenly aware of its social and environmental responsibilities, and of its role as a major contributor to development in the country’s energy sector.

An example of this approach is its Power Generation Optimization Project (OGE) initiative in developing in the country’s Amazon district. The first project of its kind in Latin America, OGE promotes the use of gas associated with oil extraction to generate electricity, providing cost savings and reduced emissions, and thereby mitigating the company’s carbon footprint.

Petroamazonas has recently initiated conversations with other state-owned petroleum organizations in the region, such as Ecopetrol and Petroperu, to develop joint ventures and investment opportunities within and beyond Ecuador’s borders. At the same time, at home it will be taking part in the Southeast Bidding Round to acquire new blocks for exploration.

The Petroamazonas EP merger with the Petroecuador Exploration and Production division, scheduled for the fourth quarter of 2012, marks an important milestone in its development and growth, and reflects confidence in its management. The company will focus on upstream operations, with a production forecast of 320,000 bpd and assets worth around $3 billion.

CORPORATE PROFILE

Ecuador’s New Energy Promise Operaciones Río Napo CEM is a joint venture between Petroecuador and Venezuela’s PDVSA, which holds 30% of the company. Created in July 2008, its goal is to develop interests at every level of the industry, but the company’s primary mission is to increase production at the Sacha field in the northeastern province of Orellana by leveraging the ongoing exploration of deposits and reserves and the introduction of new technology.

Sacha contains proven reserves of 400 million barrels, according to Río Napo General Manager Patricio Román, and has the potential to reach more than 500 million barrels, making it the country’s highest-producing field. Current output stands at 61,400 bpd, with a goal of reaching 70,000 by the end of 2012.

Next year, Río Napo aims to introduce more-advanced processes and new techniques to improve its production and increase reserves. The goal is to propel itself into the upper echelons of the industry with its quality product and to explore export opportunities to Asia and Russia, says Román.

CORPORATE PROFILE

Downstream Leader Focuses on Raising Sector’s Capacity Established in 1989, EP Petroecuador (the State Oil Company of Ecuador) is the country’s leading hydrocarbons company. It produced almost 200,000 bpd in the first six months of 2012.

By the end of this year, it will become the organization responsible for the nation’s downstream interests—including transport, distribution, refining and marketing—as the result of a planned modernization process with Ecuador’s other state-owned petroleum company, Petroamazonas EP. According to General Manager Marco Calpoviña, the company’s goal is to evolve into a net exporter of high-quality finished products.

To do so, Petroecuador aims to build a new $12 billion refinery, in cooperation with Venezuela’s PDVSA and other partners, by 2016. It will have a capacity of 100,000 bpd for the production of basic petrochemicals such as propylene and xylene.

Petroecuador is the leader in fuel-oil sales in Ecuador and manages the Trans-Ecuadorian Pipeline System (SOTE). It is planning to construct a connection to Colombia to complement the link already in place to Peru for when production begins in the country’s south.

PROMOTION 9

CORPORATE PROFILE

SCHLUMBERGER: A Proud Past and a Bright Future Schlumberger is a global leader in technology, project management and information solutions for oil and gas clients, and is active in 85 countries, employing 115,000 people worldwide. The company invested $1.1 billion in R&D last year, and maintains a network of six research laboratories in the United States, the United Kingdom, Russia, Norway, Saudi Arabia and Brazil.

Schlumberger delivers the industry’s widest range of products and services, including seismic and geophysical services, wireline logging, drilling services, well services such as cementing and stimulation, testing and subsea, coiled tubing and slickline, interpretation and consultancy, specialized software solutions and integrated project management.

Present in Ecuador since November 1934, when it ran the country’s first electrical log on Ancon’s Doña Santa Elena field, Schlumberger has played an active role in many of the Ecuadorean oil industry’s successes. For more than seven decades, it has been instrumental in helping domestic and international oil companies achieve their goals.

Schlumberger has expanded its portfolio in Ecuador, keeping pace with the latest technology, to ensure that it exceeds clients’ requirements.

The company believes in sharing know-how and has established relationships with local experts and universities, benefiting multiple generations of Ecuadorean professionals.

The company also collaborates with educators in underprivileged areas to inspire Ecuador’s youth to study science and technology.

The Schlumberger Excellence in Educational Development (SEED) nonprofit program is currently active in 15 Ecuadorean schools.

Serving industry and community alike, Schlumberger remains committed to advancing Ecuador’s interests over the long term.

EXPERTS EXPRESS CONFIDENCE IN ECUADOR’S PROSPECTS

Exploration success rates make good on nation’s promise and unexplored fields offer growth potential While international oil companies considering taking part in Ecuador’s Southeastern Round may be under the impression that doing business here is a risky or uncertain proposition, the success rate that producers already working in the country are enjoying should make them think again.

Looking at some of the compelling developments in the sector, Schlumberger’s Guillermo Jalfin, the vice president of Business Development and New Ventures Latin America, commented on Ecuador’s many opportunities: “There’s the drive to increase national oil production, which is reversing the trend of declining production in mature fields; the will to encourage overseas investment and create a new business model; and the access to new technologies as a requirement for participating in the process.”

That’s not just talk. The Paris-based oil services company is putting its money where its mouth is, committing to investments of nearly $1.3 billion over the next five years under the terms of a production-incentive contract signed in February with Petroecuador. It will drill 72 development wells and 107 work-

overs, and expects to raise production from 43,000 bpd to 60,000 bpd.

David Martin, an oil industry leader and the CEO of Gente Oil Global, agrees: “Exploration risk is a lot different than it was years ago. It has been cut substantially by new technologies. There are no ‘dry’ structures in Ecuador. They may not be easy to exploit, as these fields are in solid jungle and there is no infrastructure.

But the technology is there; one just has to be careful to protect the environment.”

Chinese oil companies, which have been active in the local market for less than a decade, provide a great example of how even newcomers can prosper in Ecuador, according to Peng Tao, the economic attaché at the Chinese Embassy in Quito. She believes the two nations’ complementary advantages in terms of financing, technology, resources and markets will lead to win-win outcomes.

“Andes Petroleum Ecuador and PetroOriental—a joint venture between two Chinese oil companies, China National Petroleum Corporation (CNPC) and China Petrochemical Corporation (SINOPEC)—operates the Tarapoa and PetroOriental blocks,” Peng says. “The successful application of production and exploration techniques has maintained production levels for the last seven years.”