Ecuador to unleash more spot crude, fuel oil

Market: Crude oil, Oil products
05/02/20

State-owned PetroEcuador launched the first of four spot crude tenders planned for 2020, as it eyes ramping up spot supply to eight cargoes a month in 2024, the company's commercial team tells Argus.

The sale tender issued late yesterday offers three 360,000 bl cargoes of medium sour Oriente for 14-16 March, 18-20 March and 19-21 March loading. Bids are due on 19 February.

After returning to the spot market in 2017 and leaving Opec last month, Ecuador is now laying the foundation for a more robust market presence derived from diminishing volumes locked into eight oil-backed debt contracts with Chinese state-owned PetroChina and Unipec, and Thailand's state-controlled PTT. PetroEcuador is currently hoping to reprogram some of PTT's supply. But even if that does not happen, more crude will become available under the existing terms of the contracts, which expire by 2024.

The short-term spot barrels are complemented by a long-term Oriente supply contract with Shell that was awarded in December 2019 at a 71¢/bl premium to WTI. The price formula under the landmark contract is based on the short-term spot sales and the Nymex WTI settlement price. Shell will lift the first of 56 cargoes at the end of March.

The Oriente spot activity also underpins mid-term sales to fellow state-owned companies PetroPeru, Chile's Enap and Jamaica's PetroJam, as well as a one-off March 2019 sale of two cargoes to Russia's state-controlled Rosneft. The contracts with Peru and Chile expired in late 2019. For now, PetroPeru does not need more crude because its refinery is closed, but Enap is looking for more, PetroEcuador said.

In terms of crude quality, Oriente is holding steady at 23.7°API with 1.61pc sulphur. When Colombian crude is imported for transport through Ecuador's pipeline system, the grade gets lighter, reaching as much as 25°API in the past.

In contrast, Napo crude is getting heavier. The grade is currently 16.8°API with 2.4pc sulphur, down from a previous 19°API as production from the Ishpingo-Tambococha-Tiputini (ITT) heavy crude complex is incorporated into the stream by Ecuador's state-owned PetroAmazonas.

Bid for resid

PetroEcuador's sales of No 6 fuel oil are also poised to rise. The company currently sells one 190,000 bl cargo a month of residual fuel on the spot market. Five more cargoes go to PetroChina and Unipec under term contracts that expire in October 2020. PetroEcuador also offers around two No 4 fuel oil cargoes per month on a spot basis.

The commercial team says it has been surprised by the market appetite for its fuel oil, which contains about 2.5pc sulphur, more than the 0.5pc currently allowed for bunkering under international shipping emissions limits imposed in January.

Longer term, the outlook for Ecuador's crude and fuel oil exports hinges on a plan to close PetroEcuador's troubled 110,000 b/d Esmeraldas refinery in favor of a more modern plant with coking capacity that would be developed by the private sector.

By Patricia Garip

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