Background

As part of efforts by President Guillermo Lasso to boost production to 756,000 barrels of oil per day by 2025, from 490,000 bpd at present (or a 54% increase), Ecuador recently launched a bidding process in the Amazon region.

In a public ceremony, the Ecuadorian government, through the Ministry of Energy and Mines, officially launched the XIII Oil Round called Intracampos II, a bidding process that seeks to attract investments for the development in the Exploration and Development phases of 6 hydrocarbon blocks: Tamya, Saywa, Tetete Sur, Lumbaqui, VHR East and VHR West, located in the province of Sucumbíos.

This process is expected to raise approximately USD $2.051 billion for the exploration and operation stages of the blocks that are awarded; USD $731 million for capital investment, and USD $1.320 billion for the operating costs of the blocks over the life of the contracts. It is estimated that with the award of the 6 blocks, an additional 18,000 to 24,000 barrels of oil per day, with an API grade between 13º and 31º, can be obtained.

The bidding process

The fields being formed in this Round are exploratory fields that are located between producing areas; the available information includes 3D and 2D seismic. In addition, the area has existing hydrocarbon transportation infrastructure such as SOTE and OCP, and includes a developed oil services industry.

According to a government statement, the blocks are low risk. Around 80 companies, which have not been named yet, from Peru, Colombia, Mexico, the United States, Canada, the United Kingdom and Egypt registered their interest at events held last week in North America. Furthermore, the statement added that “Ecuador has solid legal security, which facilitates the opportunity to attract investment for the development of 6 blocks in the Amazon, which in future could add 24,000 barrels of crude to national production”.

The Ministry of Energy and Non-Renewable Natural Resources announced that it plans to sign the contracts on 23 March 2023, which will be under the Participation Modality, where contractors participate in a portion of the oil extracted, as payment for their investments, and the state receives the rest of the oil. This means that the Ecuadorian state will not commit any investment for the development of the fields.

The participation of foreign operators in oil production will depend, among other variables, on the price of oil.

‍

Technical characteristics of the Intercampos II blocks

Lumbaqui: Approximate area of 167,491.5 hectares, with prospective resources of 24.63 million barrels and an expected API grade of 26º – 31º;

Saywa: Approximate area of 133,519.6 hectares, with prospective resources of 18.15 million barrels and an expected API grade of 14º – 17º;

Tamya: Approximate area of 9,957.2 hectares, with prospective resources of 17.27 million barrels and an expected API grade of 18º – 22º;

Tetete Sur: Approximate area of 3,096.2 hectares, with prospective resources of 4.60 million barrels and an expected API grade of 22º – 26º;

VHR Oeste: Approximate area of 8,913.3 hectares, with prospective resources of 9.85 million barrels and an expected API grade of 21º – 28º;

VHR Este: Approximate area of 8,913.3 hectares, with prospective resources of 33.68 million barrels and an expected API grade of 21º – 28º.

‍

Socio-environmental compliance

The blocks to be offered in the Round have been established respecting the areas destined to the National System of Protected Areas, so the Ecuadorian State will ensure that the awarded companies comply unrestrictedly with Ecuadorian environmental regulations in order to generate a model for the development of the industry. Also, the companies that are designated to develop the new blocks must comply with the environmental licensing process prior to carrying out hydrocarbon activities.

According to the state portfolio, the process included 50 community assemblies and 5 meetings with local indigenous authorities and leaders in the province of Sucumbios.

‍