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Ecuador Oil and Gas Report Q1 2011


Ecuador Oil and Gas Report Q1 2011

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Price $530.00
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Publisher Business Monitor International
Date of Report Aug 1, 2011
Quick Overview
The latest Ecuador Oil & Gas Report from BMI forecasts that the country will account for 3.04% of LatinAmerica regional oil demand by 2015, while providing 3.64% of supply. Latin American regional usewill average an estimated 7.80mn barrels per day (b/d) in 2010. It should rise to 7.96mn b/d in 2011 andreach 8.49mn b/d by 2015. Regional oil production in 2010 should average an estimated 10.02mn b/d. Itis set to rise to 11.68mn b/d by 2015. Oil exports have been slipping, because demand growth hasexceeded the pace of supply expansion. In 2001, the region was exporting an average of 3.37mn b/d. Thistotal falls to an estimated 2.29mn b/d in 2010 and is forecast to slip further to 2.22mn b/d in 2015. Theprincipal exporters will be Mexico, Venezuela, Colombia and Brazil.
In terms of natural gas, the region in 2010 will consume an estimated 208.5bn cubic metres (bcm), withdemand of 263.9bcm targeted for 2015. Production of an estimated 221.0bcm in 2010 should reach264.3bcm in 2015, and implies 0.4bcm of net imports at the end of the period. Ecuador’s share of regionalgas production and consumption will remain insignificant, accounting for no more than 0.38% of themarket by 2015.
For 2011, there is considerable oil demand and oil price uncertainty, but still a very strong possibility thatoil will trend higher. Economic growth may have been subdued late in 2010 and into early 2011, butshould still support meaningful oil demand increases. Non-OPEC supply is likely to emerge only slightlyhigher so, with continued OPEC discipline, the foundations have been laid for an oil price rise – albeitfalling well short of the improvement seen this year. It seems likely that the 2010 average OPEC basketprice will have emerged around the US$77.00 per barrel (bbl) level, representing a year-on-year (y-o-y)gain of approximately 27%. Progress towards at least US$80 is seen as achievable in 2011.
Ecuador’s real GDP in 2010 is forecast by BMI to rise by 2.2%. We are forecasting 2.0% average annualgrowth in 2010-2015. State-owned Petroecuador has historically cooperated with several internationaloil companies (IOCs) and they between them delivered a rising volume of crude over the past few years.However, nationalisation and reduced investment have led to the stagnation of output. We are assumingoil and gas liquids production of no more than 425,000b/d by 2015, with the country expected to pump480,000b/d in 2010. Beyond 2009/10, consumption is forecast to increase by around 3% per annum,implying demand of 258,000b/d by the end of the forecast period. The net export capability wouldtherefore be approximately 167,000b/d by 2015.
Between 2010 and 2020, we are forecasting a decline in Ecuador’s oil production of 16.7%, with crudevolumes falling from an estimated 480,000b/d in 2010 to 400,000b/d by the end of the 10-year forecastperiod. Oil consumption between 2010 and 2020 is set to increase by 34.4%, with growth averagingaround 3.0% per annum towards the end of the period and the country using 299,000b/d by 2020. Gasproduction and consumption could double, albeit from a very low base over the period. Details of BMI’s10-year forecasts can be found in the appendix to this report.
Ecuador holds seventh place, ahead of Mexico, in BMI’s composite Business Environment (BE) ratings,which combine upstream and downstream scores. The country ranks seventh in BMI’s updated upstreamBusiness Environment ratings, just ahead of Bolivia. Scores are mid-table or higher for proven oilreserves and reserves-to-production ratios (RPR). However, country risk is high, oil production growthprospects are poor and the privatisation trend is unattractive, with increasing state involvement inupstream activities. Ecuador now holds seventh place, above Venezuela, in BMI’s downstream BusinessEnvironment ratings, reflecting an unusually high country risk, regulatory concerns, state ownership ofassets and a less-than-stellar growth outlook. The score falls five points short of Trinidad, so there is littlechance of progress in the next few quarters.
Table of Contents
Executive Summary ........................................................................................................................................ 7
Ecuador Energy Market Overview .................................................................................................................. 9
Global Oil Market Review .............................................................................................................................. 11
Regaining Momentum .............................................................................................................................................................................................. 11
Quarterly Trends ..................................................................................................................................................................................................... 12
Global Oil Market Outlook ............................................................................................................................. 13
Sitting Comfortably .................................................................................................................................................................................................. 13
Oil Price Forecasts .................................................................................................................................................................................................. 14
Oil Supply, Demand And Price Outlook ....................................................................................................... 15
Short-Term Demand Outlook ................................................................................................................................................................................... 15
Table: Global Oil Consumption (000b/d) ........................................................................................................................................................... 16
Short-Term Supply Outlook ..................................................................................................................................................................................... 16
Table: Global Oil Production (000b/d)............................................................................................................................................................... 17
Longer-Term Supply And Demand ........................................................................................................................................................................... 18
Oil Price Assumptions.............................................................................................................................................................................................. 20
Table: Crude Price Assumptions 2010 ................................................................................................................................................................ 20
Table: Oil Price Forecasts .................................................................................................................................................................................. 20
Regional Energy Market Overview ............................................................................................................... 21
Oil Supply And Demand ........................................................................................................................................................................................... 21
Table: Latin America Oil Consumption (000b/d) ................................................................................................................................................ 22
Table: Latin America Oil Production (000b/d) ................................................................................................................................................... 23
Oil: Downstream ..................................................................................................................................................................................................... 24
Table: Latin America Oil Refining Capacity (000b/d) ........................................................................................................................................ 24
Gas Supply And Demand ......................................................................................................................................................................................... 25
Table: Latin America Gas Consumption (bcm) ................................................................................................................................................... 25
Table: Latin America Gas Production (bcm) ...................................................................................................................................................... 25
Liquefied Natural Gas.............................................................................................................................................................................................. 26
Table: Latin America LNG Exports/(Imports) (bcm) .......................................................................................................................................... 26
Business Environment Ratings .................................................................................................................... 27
Latin America Region .............................................................................................................................................................................................. 27
Composite Scores................................................................................................................................................................................................ 27
Table: Regional Composite Business Environment Rating ................................................................................................................................. 27
Upstream Scores ................................................................................................................................................................................................. 28
Table: Regional Upstream Business Environment Rating................................................................................................................................... 28
Ecuador Upstream Rating – Overview ............................................................................................................................................................... 28
Ecuador Upstream Rating – Rewards ................................................................................................................................................................. 29
Ecuador Upstream Rating – Risks ...................................................................................................................................................................... 29
Downstream Scores ............................................................................................................................................................................................ 30
Table: Regional Downstream Business Environment Rating ............................................................................................................................... 30
Ecuador Downstream Rating – Overview ........................................................................................................................................................... 30
Ecuador Downstream Rating – Rewards ............................................................................................................................................................ 31
Ecuador Downstream Rating – Risks .................................................................................................................................................................. 31
Industry Forecast Scenario ........................................................................................................................... 32
Oil And Gas Reserves ......................................................................................................................................................................................... 32
Oil Supply And Demand...................................................................................................................................................................................... 32
Gas Supply And Demand .................................................................................................................................................................................... 33
Refining And Oil Products Trade ........................................................................................................................................................................ 33
Revenues/Import Costs ....................................................................................................................................................................................... 33
Table: Ecuador Oil And Gas – Historical Data And Forecasts ........................................................................................................................... 34
Other Energy ...................................................................................................................................................................................................... 35
Table: Ecuador Other Energy – Historical Data And Forecasts ......................................................................................................................... 36
Key Risks To BMI’s Forecast Scenario ............................................................................................................................................................... 36
Long-Term Oil And Gas Outlook ........................................................................................................................................................................ 36
Oil And Gas Infrastructure ............................................................................................................................ 37
Oil Refineries ........................................................................................................................................................................................................... 37
Table: Refineries In Ecuador .............................................................................................................................................................................. 37
Service Stations ........................................................................................................................................................................................................ 39
Oil Pipelines ............................................................................................................................................................................................................ 39
Oil Storage ............................................................................................................................................................................................................... 39
Macroeconomic Outlook ............................................................................................................................... 40
Table: Ecuador – Macroeconomic Forecasts ..................................................................................................................................................... 41
Competitive Landscape ................................................................................................................................ 42
Table: Key Domestic And Foreign Companies ................................................................................................................................................... 43
Overview/State Role ................................................................................................................................................................................................. 43
Licensing And Regulation ................................................................................................................................................................................... 43
Government Policy ............................................................................................................................................................................................. 45
International Arbitration ................................................................................................................................................................................... 46
International Energy Relations ........................................................................................................................................................................... 48
Table: Key Upstream Players ............................................................................................................................................................................. 50
Table: Key Downstream Players ........................................................................................................................................................................ 50
Company Monitor .......................................................................................................................................... 51
Petroecuador ........................................................................................................................................................................................................... 51
Eni Ecuador ............................................................................................................................................................................................................. 55
Petrobras de Ecuador .............................................................................................................................................................................................. 57
Repsol YPF .............................................................................................................................................................................................................. 59
Petroamazonas – Summary ................................................................................................................................................................................. 62
Petróleos de Venezuela (PdVSA) – Summary...................................................................................................................................................... 62
ENAP – Summary ............................................................................................................................................................................................... 64
Andes Petroleum – Summary .............................................................................................................................................................................. 64
Oleoducto de Crudos Pesados (OCP) – Summary .............................................................................................................................................. 64
Inpex – Summary ................................................................................................................................................................................................ 65
Sinopec – Summary ............................................................................................................................................................................................. 65
Noble Energy – Summary ................................................................................................................................................................................... 65
Ivanhoe Energy – Summary ................................................................................................................................................................................ 66
Others – Summary .............................................................................................................................................................................................. 66
Former IOC Partners – Summary ....................................................................................................................................................................... 67
Oil And Gas Outlook: Long-Term Forecasts ............................................................................................... 69
Regional Oil Demand .............................................................................................................................................................................................. 69
Ecuador Oil & Gas Report Q1 2011
© Business Monitor International Ltd Page 5
Table: Latin America Oil Consumption (000b/d) ................................................................................................................................................ 69
Regional Oil Supply ................................................................................................................................................................................................. 70
Table: Latin America Oil Production (000b/d) ................................................................................................................................................... 70
Regional Refining Capacity ..................................................................................................................................................................................... 71
Table: Latin America Oil Refining Capacity (000b/d) ........................................................................................................................................ 71
Regional Gas Demand ............................................................................................................................................................................................. 72
Table: Latin America Gas Consumption (bcm) ................................................................................................................................................... 72
Regional Gas Supply ................................................................................................................................................................................................ 73
Table: Latin America Gas Production (bcm) ...................................................................................................................................................... 73
Ecuador Country Overview ..................................................................................................................................................................................... 73
Methodology And Risks To Forecasts ................................................................................................................................................................. 73
Glossary Of Terms ........................................................................................................................................ 75
Introduction ............................................................................................................................................................................................................. 76
Ratings Overview ..................................................................................................................................................................................................... 76
Table: BMI Oil And Gas Business Environment Ratings: Structure .................................................................................................................... 77
Indicators ................................................................................................................................................................................................................. 78
Table: BMI Oil And Gas Business Environment Upstream Ratings: Methodology .............................................................................................. 78
Table: BMI Oil And Gas Business Environment Downstream Ratings: Methodology ......................................................................................... 79
BMI Methodology .......................................................................................................................................... 81
How We Generate Our Industry Forecasts ......................................................................................................................................................... 81
Energy Industry .................................................................................................................................................................................................. 81
Cross checks ....................................................................................................................................................................................................... 82
Sources ............................................................................................................................................................................................................... 82




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