Ecuador to restore oil savings fund, hedge exports
In another significant shift on its energy policy, Ecuador is considering restoring an oil savings fund and hedging its oil exports.
The government's new economic team is working on re-establishing a fund, which was scrapped under the previous government, to protect the country's oil-dependent economy from market downturns, according to energy minister Carlos Perez.
In the last 12 months, rising crude prices gave Ecuador a $1bn surplus from exporting its Napo and Oriente grades above the $41.92/bl price assumption in the 2018 budget.
"We still must decide what portion of this money should be put into a savings fund," Perez said, as Ecuador still must finance a mounting fiscal deficit in 2018.
Perez dismissed the possibility that a recent oil price decline will last. "I believe that prices will recover and hold at the level we have seen in the last months at least for a while, so Ecuador can create a savings fund. The question is how much money we should earmark for it."
According to Perez, Ecuador still supports Opec's pact to reduce output and balance crude prices. "The inventories' balance is positive for Opec because there has been an important output reduction, helped by unexpected factors" such as a drop in Venezuela's production.
Perez says he has previously recommended a hedging policy to the finance ministry to protect the budget from price volatility. "Hedging would enable Ecuador to better manage its budget, but right now would not be the best moment to hedge because prices are rising," Perez says.
According to Perez, Ecuador is also discussing how much of the income produced by the development of a series of small oil fields known as Intracampos should be earmarked for the state.
Quito hopes to launch the Intracampos tender in June. The eight Intracampos oil fields are in the northern Amazon oil district and will require a total of $1bn in exploration investment.
The Intracampos round will bring back the production-sharing contract that was abandoned under former president Rafael Correa, but his successor Lenin Moreno, who took office in May 2017, is working to revive it.
During a conference at the American-Ecuadorean Chamber of Commerce, Perez said Ecuador expects state participation of at least 51pc in the new production-sharing agreements.
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US job growth nearly halved in April: Update
US job growth nearly halved in April: Update
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Kazakhstan outlines Opec+ compensation plan
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Iraq sets plan to compensate for excess Opec oil output
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