Ecuador races to divert oil lines vulnerable to erosion

  • Market: Crude oil, Electricity
  • 03/08/21

State-owned PetroEcuador and foreign oil producers are diverting more segments of two crude export pipelines vulnerable to severe erosion along the Coca river and tributaries.

PetroEcuador is currently working on a seventh bypass of its 360,000 b/d Sote pipeline at San Luis in Napo province. The 503km (313mi) line is operating normally, but throughput will be briefly suspended to connect the new segment once the work is completed in two to three weeks, the company said.

"We hope this is the last bypass, but it depends on the erosion," a PetroEcuador official told Argus.

The 450,000 b/d private-sector OCP pipeline is preparing to start a six-month project to install a 4km permanent bypass at kms 95-98 around San Luis as well. Eight temporary bypasses and two definitive ones were already constructed in the area since last year.

The 485km OCP is owned by China's state-owned Andes Petroleum, Spain's Repsol, US independent Occidental, Argentina's Pampa Energia and UK-French independent Perenco.

The bypass projects of both pipelines have been delayed in recent weeks because of protests in San Luis, where local communities are demanding more local hires to do the work.

Torrential rains, uniquely regressive erosion and the collapse of the San Rafael waterfall led to ruptures on the two lines in April 2020 in the throes of the Covid-19 pandemic and oil market turmoil. The catastrophic events slashed the former Opec country's oil production and led to force majeure declarations on exports.

Since then, Sote and OCP have installed multiple pipeline bypasses to mitigate further risk, and are closely monitoring risk levels. On 19-20 July, the OCP paused operations after heavy rains drove up water levels on the Papallacta river.

Climate risk?

The erosion is currently 7.9km from the 1.5GW Coca Codo Sinclair hydroelectric dam but is not advancing for now, Ecuador's state-owned utility Celec said.

The Chinese-built hydro plant is among numerous infrastructure projects dating back to the 2007-17 administration of exiled former president Rafael Correa that were later found to be structurally defective.

To minimize risk, Celec plans to shore up the site of the hydro plant's water collection.

A team from the US Army Corps of Engineers (USACE) visited the site of the erosion last week, the latest international cooperation to help the new government in Quito address the threat to vital infrastructure. Oil exports are Ecuador's main revenue source.

Ecuadorean officials told Argus the erosion is a natural phenomenon, along with the country's host of volcanic and seismic activity. But they do not rule out climate change for accelerating it and making heavy rains less predictable.

"One can't say for sure this is happening because of climate change, but what is clear is that there wasn't enough information when the pipelines were built many years ago, so maybe today they wouldn't have been built there," Ecuador's former oil minister Rene Ortiz told Argus in a recent interview.

Sote dates back to the 1970s, and OCP from 2003.


Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
23/05/24

US poised to back New Jersey offshore wind farms

US poised to back New Jersey offshore wind farms

Houston, 23 May (Argus) — US regulators could soon approve two offshore wind projects near New Jersey, but with stipulations that would slightly reduce the number of turbines installed in the Atlantic Ocean. The US Bureau of Ocean Energy Management (BOEM) favors a design for the Atlantic Shores South system that would result in up to 195 turbines, as many as 10 offshore substations and eight transmission cables to ferry electricity ashore to New Jersey, the agency said today in its final environmental impact statement for the project. Atlantic Shores South comprises two separate projects, Atlantic Shores 1 and Atlantic Shores 2, which are 50:50 partnerships between Shell and EDF Renewables. The pair's overall capacity is tentatively set at 2,837MW, with the first phase targeting 1,510MW and a size for the second to be determined. Atlantic Shores 1 has a contract to deliver up to 6.18mn offshore renewable energy certificates each year to New Jersey, with first power expected in 2027. The state selected the project through its second offshore wind solicitation, with the 20-year contract scheduled to begin in 2028. The developers had proposed installing up to 200 turbines, but BOEM decided to favor a modified plan, adopting alternatives put forward by the companies in the name of mitigating impacts on local habitats while limiting turbine height and their proximity to the shore to reduce the project's "visual impacts," a point of contention among New Jersey residents who fear damage to tourism in oceanside communities. The BOEM-endorsed design would have mostly "minor" to "moderate" effects on the surrounding environment, with exceptions including consequences for North Atlantic right whales, commercial and for-hire fisheries and local scenery, which could be "major." The areas potentially hit hardest by the projects would be open to "major" consequences regardless of the project design, according to BOEM's analysis. The preference is not BOEM's final ruling, but it does herald the path the agency is likely to take. Regulators will publish the review in a "coming" edition of the Federal Register, starting a mandatory 30-day waiting period before BOEM can publish its final decision on the project. By Patrick Zemanek Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Find out more
News

Australia’s Origin to keep Eraring coal plant on line


23/05/24
News
23/05/24

Australia’s Origin to keep Eraring coal plant on line

Perth, 23 May (Argus) — Australian utility firm Origin Energy and the New South Wales (NSW) state's Labor government have agreed to keep the nation's largest single power facility open for at least two more years. The deal involves Origin shelving plans to close the 2,880MW Eraring coal-fired power plant near the NSW city of Newcastle next year, and operating the generator until 19 August 2027 and potentially until April 2029. A generator engagement project agreement has been signed, under which Origin will receive compensation covering the cost of running the 40-year old plant, while aiming for the plant to generate at least 6TWh for the two additional fiscal years it will run. Eraring produced 12.15TWh last year, Origin's 2023 annual report showed. The firm must decide by 31 March in 2025 and 2026 whether it will enter the underwriting arrangement for the following financial year. If Origin profits from its Eraring plant during these years it will pay NSW 20pc of the proceeds, capped at A$40mn/yr ($26.5mn/yr), but no compensation will be paid after 30 June 2027. Origin can claim no more than 80pc of Eraring's financial losses each year from NSW and the compensation is to be capped at A$225mn each year, if it does opt in. Origin spent A$147mn for generation maintenance and sustaining capital on Eraring in 2023, with A$69mn owing to costs associated with the facility's ash dam. Eraring provides around 20pc of NSW's delivered electricity and was scheduled to be replaced by the 2,200MW pumped hydro scheme known as Snowy 2.0 — which has experienced significant delays and will not be on line until 2029 — and the 750MW Kurri Kurri gas-fired power station also being developed by federal government-owned Snowy Hydro, which is to be commissioned later this year. Coal-fired power generation The viability of coal-fired generators has been declining for some time as Australia's renewable power generation grows to nearly 40pc of the total grid capacity. Widespread rooftop solar is driving electricity prices into negative territory during daylight hours and disrupting the profitability of large-scale generators. Origin has committed to a 460MW battery energy storage system (BESS) at the site of Eraring, which it says will provide two hours of firming capacity to the national electricity market. Australia's Clean Energy Council said the announcement must be backed by measures to integrate new renewable generation and storage into the NSW grid with "clear signals and support" to rapidly transition to renewables. Planning issues and rising costs have stymied the federal and state governments' plans to increase Australia's dependence on large-scale wind, solar, pumped hydro and BESS projects to replace coal generators. Canberra is aiming for an 82pc renewables share for Australia's electricity production by 2030. Coal-fired generation increased on the year for January-March because of a warmer-than-average summer and increased availability. By Tom Major Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Mexico crude exports up after Tula refinery outage


22/05/24
News
22/05/24

Mexico crude exports up after Tula refinery outage

Mexico City, 22 May (Argus) — Mexican crude exports have bounced back in May after a power outage hit state-owned Pemex's 315,000 b/d Tula refinery last week, likely freeing more crude for the export market. Crude exports rose to about 838,000 b/d so far in May, up by 18pc from full-month April but still 22pc lower compared with all of May 2023, according to trade analytics firm Kpler data. The month-over-month hike was likely supported by a power outage at the Tula refinery on 13 May, which affected up to 20 processing plants, according to market sources. It remains unclear if the refinery has resumed operations, but sources said the restart could take about two weeks. The Tula refinery, which supplies refined products to Mexico City's metropolitan area, processed 246,500 b/d of crude in March, of which 182,000 b/d, or 74pc, was medium or light sour crude, according to the latest Pemex data. Medium and light sour crude exports rose by 13pc to 336,000 b/d so far in May from the previous month, Kpler data show. Additionally, fires at the Salina Cruz and Minatitlan refineries in late April could have also added to the uptick of crude exports. Mexico this year trimmed crude exports to feed its domestic refineries as President Andres Manuel Lopez Obrador seeks to cut fuel imports in his final year in office, in line with his campaign promise to make Mexico more energy independent. Pemex's six domestic refineries processed over 1mn b/d in March for the first time in almost eight years, driven by billion-dollar investments in maintenance since 2019 and the cut in crude exports. The start-up of the new 340,000 b/d Olmeca refinery could further reduce crude exports, but the refinery still faces multiple delays . By Antonio Gozain Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

UK general election set for 4 July


22/05/24
News
22/05/24

UK general election set for 4 July

London, 22 May (Argus) — A general election will take place in the UK on 4 July, prime minister Rishi Sunak said today. The announcement coincides with official data showing that UK inflation has fallen to its lowest level in nearly three years. Labour, the country's main opposition party led by Keir Starmer, has held a substantial lead in polls in recent months and performed well in local elections earlier this month. It won nearly 200 seats on local councils, as well as several regional mayoral contests, while the ruling Conservative Party lost almost 500 council seats. The Conservatives have been in power since 2010 and have fielded five prime ministers during that time. The two main parties are likely to release more detailed manifestos once the election campaign begins, but their current respective energy policies have many similarities. Both back a windfall tax on oil and gas producers and support nuclear power. They both also support offshore wind and solar power, although Labour has incrementally more ambitious targets for those renewables and has plans for more onshore wind. Labour also wants a zero-carbon power grid by 2030 , while the Conservatives are aiming for that in 2035. The Conservatives have rolled back some climate policy since Sunak became prime minister, while Labour in February backed down on its pledge to spend £28bn/yr ($35.6bn/yr) on the country's energy transition, if it wins the election. For a general election to take place in the UK, the prime minister must request permission from the British monarch — King Charles III — who then dissolves parliament. A general election must take place at least once every five years in the UK, although a prime minister can call one at any point. The UK's last general election was held on 12 December 2019 and Boris Johnson was elected prime minister. There have since then been two prime ministers — Liz Truss in September-October 2022 — and Sunak. Truss was selected by Conservative Party members and Sunak became prime minister in October 2022 after the only other candidate withdrew from the leadership contest. The Conservatives hold 344 seats out of 650 in the House of Commons, the UK's lower house of parliament. But 105 members of parliament have said that they will not run at the next election, 66 of whom are Conservatives. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

US crude stocks rise by 1.8mn bl last week: Update


22/05/24
News
22/05/24

US crude stocks rise by 1.8mn bl last week: Update

Adds report details starting in seventh paragraph. Calgary, 22 May (Argus) — US crude inventories rose by 1.8mn bl last week on a sizable build in the Gulf coast region, the Energy Information Administration (EIA) reported today. Crude stocks across the US came in at 458.8mn bl in the week ended 17 May, up from 457mn bl a week earlier. Inventories were up by by 3.7mn bl compared to a year earlier. Stocks in the US Gulf coast rose on the week by 3.6mn bl to 261.5mn bl, approaching a 12-month high set in the week ended 26 April when stocks were at 261.6mn bl. The week-over-week build in the US Gulf coast ranks as the fifth largest through the first 20 weeks of the year. Inventories at the Cushing storage hub in Oklahoma rose by 1.3mn bl to 36.3mn bl, but that was still 910,000 bl lower than the same week in 2023. Crude inventories at the US Strategic Petroleum Reserve (SPR) increased by 993,000 bl to 368.8mn bl, the largest weekly build so far this year. SPR stocks are not included in the overall EIA commercial crude inventory figures. US crude exports rose last week by 595,000 b/d to 4.7mn b/d, while imports fell by 81,000 b/d to 6.7mn b/d. Net imports fell by 676,000 b/d to 1.9mn b/d as a result. Domestic crude output was steady at 13.1mn b/d. US crude refiners processed about 16.9mn b/d last week, up by 241,000 b/d from the week prior and the highest since the week ended 12 January. Runs were 354,000 b/d higher than the same week in 2023. Refinery utilization rates on average rose to 91.7pc nationwide, up from 90.4pc in the prior week and 91.7pc in the same week of 2023. Refiners in the midcontinent and Gulf coast regions drove the weekly gains, each climbing to multi-month highs. Utilization rates in the midcontinent rose to 94.8pc from 90.8pc in the week prior while rates in the Gulf coast climbed to 93.7pc from 92.7pc. By Brett Holmes US weekly crude stocks/movements Stocks mn bl 17-May 10-May ±% Year ago ±% Crude oil (excluding SPR) 458.8 457.0 0.4% 455.2 0.8% - Cushing crude 36.3 35.0 3.8% 37.2 -2.4% Imports/exports '000 b/d Crude imports 6,663 6,744 -1.2% 5,850 13.9% Crude exports 4,730 4,135 14.4% 4,549 4.0% Refinery usage Refinery inputs '000 b/d 16,894 16,653 1.4% 16,540 2.1% Refinery utilisation % 91.7 90.4 1.4% 91.7 0.0% Production mn b/d 13.1 13.1 0.0% 12.3 6.5% — US Energy Information Administration Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Generic Hero Banner

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more