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
28/03/24

Stalling climate finance an energy security risk : WRI

Stalling climate finance an energy security risk : WRI

London, 28 March (Argus) — The "best bet" to achieving global energy security is through mitigation funding and multilateral cooperation, according to the World Resources Institute (WRI). WRI highlighted that governments are funding more domestic renewable energy projects but have increased oil and gas production in the name of "energy security" at home in the years following the Russia's invasion of Ukraine. The recent rebrand of energy transition funding to energy security funding has allowed some developed nations to justify domestic oil and gas licences and drag their feet on multilateral financial commitments. This is causing "real worry" among climate-vulnerable developing nations, WRI chief executive Ani Dasgupta said. He said that although the initial "shock" to the world's energy markets after the invasion of Ukraine "quickly went away", it has triggered "real worry among poorer countries that when push comes to shove, it won't be an even game, or have a fair outcome." Developing countries have long complained about the lack of access to climate funding. Richer nations have only recently met the $100bn/yr target in climate finance to developing countries agreed in 2009, while discussions on setting a new climate finance goal for 2025 at Cop 29 in Baku in November could prove difficult. President of the Republic of Congo (Brazzaville) Denis Sassou-Nguesso said last year that the $100bn/yr in climate financing to developing countries promised by rich countries "never reached us", adding that the annual UN Cop climate conferences have become little more than a talking shop. "Just after the invasion of Ukraine, every country started to think about energy security," Dasgupta said. "In theory, good things could have happened, countries could have concluded that their best bet to getting energy security is by going renewable". But it was not the case in key consumer countries or regions, Dasgupta pointed out. China bought the majority of Russian gas following the EU's withdrawal, he said, and has since upped production at coal-fired power stations despite an "extraordinary" acceleration towards renewables set for 2023-28, according to Paris-based energy watchdog IEA . In Europe, the UK and Norway continue to award new oil and gas licences . "In the US, the fossil fuel lobby argues that the best route to energy security is to invest more in fossil fuels". But the best route is to invest in more renewables, he said. "Even if the US produces a large amount of oil and gas, it is still a traded commodity, and so you have to pay a price for it that is set globally." The US special presidential co-ordinator for energy security Amos Hochstein has also suggested in September that a widening climate finance gap could ultimately threaten global security. "We have seen the percentage of dollars spent on the energy transition outside the OECD, in developing and middle income countries actually go down instead of up…" By Madeleine Jenkins Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Read more
News

Japan’s Renova starts Miyagi biomass power plant


28/03/24
News
28/03/24

Japan’s Renova starts Miyagi biomass power plant

Tokyo, 28 March (Argus) — Japanese renewable power developer Renova started commercial operations today at its 75MW Ishinomaki Hibarino biomass-fired power plant in northeast Japan's Miyagi prefecture. The power plant is designed to consume an undisclosed volume of wood pellets and palm kernel shells (PKS) to generate around 530 GWh/yr of electricity. Renova originally targeted to start up the power plant in May 2023 but postponed the start-up multiple times. Renova has been forced to delay the start-up schedules at several of its power plants. It previously targeted to begin commercial operations of the 75MW Omaezaki biomass power plant this month but postponed it to July, as the final adjustment of boiler and turbine units is taking longer than expected. It delayed the launch of the 74.8MW Tokushima Tsuda biomass power plant in September before it began commercial operations in December 2023 . Japan imported 1mn t of wood pellets during January-February, up by 14pc from the same period in 2023, according to the finance ministry. PKS purchases fell by 24pc to 466,186t. By Nanami Oki Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Baltimore bridge collapse to raise retail fuel prices


27/03/24
News
27/03/24

Baltimore bridge collapse to raise retail fuel prices

Houston, 27 March (Argus) — The collapse of the Francis Scott Key Bridge in Baltimore, Maryland, is more likely to increase regional gasoline prices than diesel due to additional freight costs and certain route restrictions. Suppliers in the region have so far signaled that the effect on broader markets will be minimal, but regional prices will likely rise, especially as peak summer demand season begins with Memorial Day weekend in late May. The bridge closure could pose more problems for gasoline supply than diesel, since gasoline cannot be transported through the Fort McHenry (I-95) and Baltimore Harbor (I-895) tunnels — the two other major roads that cross the Patapsco River at Baltimore — while there are no restrictions on diesel, according to the Maryland Transportation Authority (MTA). Fuel wholesaler Global Partners said yesterday that it would like to see hours of service waivers for trucking in the region to minimize fuel supply disruption to customers, but the Federal Motor Carrier Safety Administration (FMCSA) is yet to issue one. Elevated retail prices are likely to be limited to the immediate Baltimore area but could spill over into neighboring markets should trucking markets remain tight due to rerouting, market sources told Argus . Fuel markets in eastern Maryland can be supplied by PBF's 171,000 b/d Delaware City, Delaware, refinery and two further plants in Pennsylvania — Monroe Energy's 190,000 b/d Trainer refinery and PBF's 160,000 b/d Paulsboro refinery. To the north, United Refining runs a 65,000 b/d plant in Warren, Pennsylvania, and along the Atlantic coast Phillips 66 operates the 259,000 b/d Bayway refinery in Linden, New Jersey. PBF, Monroe and United did not immediately respond to a request for comment on whether the bridge collapse is affecting refinery operations. Phillips 66 declined to comment on commercial activities. Still, the five nearby refineries — representing all the Atlantic coast's 850,000 b/d of crude processing capacity — are unlikely to see their operations curtailed by limits in shipping products to Maryland. With no refinery in the state of Maryland, most fuels are delivered to Baltimore by Gulf coast refiners on the Colonial Pipeline. Global Partners, which operates a terminal just west of the collapsed bridge, said yesterday it is primarily supplied by the pipeline and expects product flows to continue. Several terminals in the Baltimore Harbor and the nearby Port Salisbury can also receive small vessels and barges of road fuels from Delaware and Pennsylvania, according to the Maryland Energy Administration (MEA). The Port of Baltimore — which remains closed since the collapse — took delivery of 24,000 b/d of gasoline and under 2,000 b/d of distillates from barges and small vessels in 2019, about three percent of the Atlantic coast's refining capacity. "A closure of the Port of Baltimore while the Colonial Pipeline is open would not significantly disrupt fuel supply," the MEA wrote in a 2022 analysis of liquid fuels supply in the state. By Nathan Risser Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

US breaks $79/bl ceiling in latest SPR purchase


27/03/24
News
27/03/24

US breaks $79/bl ceiling in latest SPR purchase

Washington, 27 March (Argus) — President Joe Biden's administration has exceeded a price ceiling that has guided when the US government would buy crude to refill the US Strategic Petroleum Reserve (SPR), with the latest crude purchase hitting a price of $81.32/bl. The US Department of Energy (DOE) six months ago adopted a new strategy for replenishing the SPR, with a plan to use consistent monthly purchases to replace some of the 180mn bl of crude that Biden sold from the reserve in 2022 after the start of the Russia-Ukraine conflict. For months, DOE has said it would continue to buy crude so long as it was a "good deal for taxpayers," which the agency defined as a purchase price not to exceed $79/bl. But the agency's latest crude purchase, for nearly 2.8mn bl of sour crude for delivery in September, came at a cost of $225.6mn, an average price of $81.34/bl, according to data DOE recently published on its website. The crude contracts went to Macquarie Commodities Trading, Sunoco Partners Marketing & Terminals and Total's Atlantic Trading & Marketing. DOE, asked for comment about why it purchased crude in excess of its price target, said there would "likely be news coming later today." Before this week, the administration had largely adhered to its $79/bl price target to buy 24.7mn bl of crude for delivery to the SPR from January through August, with the exception of a $79.10/bl purchase for January delivery. DOE reiterated the price ceiling on 14 March, when it announced a new solicitation to buy crude, and last year had called off multiple crude solicitations when prices came in too high. DOE has previously increased its price ceiling based on shifts in the oil market. DOE in 2022 had initially targeted a purchase price of $67-$72/bl, resulting in the purchase of 6.3mn bl of crude last summer at an average price of $72.67/bl. But after rising prices put that target out of reach, DOE raised its price ceiling to $79/bl. The SPR held 363mn bl of crude as of 22 March, according to federal data. By the end of this year, as a result of crude purchases, the reserve is expected to "be back to essentially where we would have been had we not sold during the invasion of Ukraine," US energy secretary Jennifer Granholm said on 20 March, after accounting for the cancellation of 140mn bl of congressional mandated crude sales that were scheduled through 2031. With the latest crude purchase, DOE will have signed contracts to buy 32.4mn bl of crude at an average price of nearly $77/bl, of which more than 19mn bl has yet to be delivered to the SPR. Another 20mn bl of crude that oil companies and traders borrowed from the SPR in 2022 is set to be returned by year-end, which would push inventories in the reserve to above 400mn bl. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

South Sudan crude output halves on pipeline blockage


27/03/24
News
27/03/24

South Sudan crude output halves on pipeline blockage

London, 27 March (Argus) — South Sudan's crude production has almost halved to around 80,000 b/d because of a blockage at a pipeline in war-torn Sudan, South Sudan's oil ministry undersecretary William Anyak Deng told Argus today. A blockage along the Chinese-led Petrodar Pipeline is currently preventing around 100,000 b/d of South Sudan's heavy sweet Dar Blend grade from reaching Sudan's Bashayer terminal on the Red Sea for export, Deng said. But production of South Sudan's medium sweet Nile Blend grade has not been impacted, as this is transported to Bashayer through the separate Greater Nile oil pipeline which remains online, he said. His comments come after Sudan earlier this month warned major oil exporting companies in South Sudan that his country could no longer carry out its obligation to transport their crude . Dar Petroleum Operating Company (DPOC) — a consortium including China's state-controlled CNPC and Sinopec and Malaysia's state-owned Petronas — produces Dar Blend but has had to all but cease output, Deng said. Nile Blend production is split between the South Sudan-based firms Sudd Petroleum Operating Company (SPOC) and Greater Pioneer Operating Company (GPOC) and currently running at around 80,000 b/d, he added. South Sudan's crude production stood at around 150,000 b/d in February, according to Argus estimates. The blockage is a result of gelling issues — solidifying crude — in the Petrodar Pipeline, which Sudanese and South Sudanese engineers are struggling to resolve. This is because of a lack of diesel that is used to heat the crude or dilute it to help it flow, Deng said. "We are working to resolve the problem right now. There is mechanical work that is ongoing, we are trying to flush out the oil," he added. But the pipeline has been suffering from leaks and pressure drops for months, with repairs complicated by the ongoing civil war in Sudan between the army and the paramilitary Rapid Support Forces. Deng said it was becoming increasingly difficult to get permission from the warring parties in Sudan to move workers, equipment and spare parts to maintain infrastructure. He also said South Sudan has been sending diesel to Sudan to help with repair work given the closure of Sudan's 100,000 b/d Khartoum refinery which has come under repeated fire since the civil war began last year. Sudan also typically produces around 50,000 b/d of mostly Nile Blend crude, but this is thought to have been impacted by the civil war. Crude exports from Sudan's Bashayer port averaged 130,000 b/d in 2023 and hit 168,000 b/d in January, according to Kpler. But exports have only averaged about 75,000 b/d since February. Landlocked South Sudan is entirely reliant on Sudan to export its crude and depends on oil sales for more than 90pc of government revenues. Any prolonged disruption to exports would put the country's economy in a precarious position. By Aydin Calik Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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