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Ecuador releases more crude for spot sales

14 May 2018 19:28 (+01:00 GMT)
Ecuador releases more crude for spot sales

Quito, 14 May (Argus) — Ecuador plans to release up to four 360,000 bl crude shipments per month for spot sales in coming weeks, as the government closes a restructuring of oil-backed loans with Chinese state-owned PetroChina and Unipec and Thailand's state-controlled PTT, energy minister Carlos Perez tells Argus.

There is a firm commitment between the parties to extend the oil delivery deadlines to repay the loans, to improve the pricing formula which will now include a premium for the Ecuadorean Oriente and Napo grades, and to reduce freight rates, Perez said.

Quito aims to sign a final agreement with the three companies by the end of May. With more crude unlocked from the oil-backed contacts, Ecuador plans to carry out more spot sales and to sign long-term agreements with a broader range of clients.

Ecuador has no plans to sign fresh oil-backed loan agreements, a policy that Perez adamantly opposes. On 10 May, during a conference at the Ecuadorean-American Chamber of Commerce in Quito, Perez said that he would rather resign than pursue that type of contract in the future.

Under current conditions, Ecuador still owes some $5bn to PetroChina, Unipec and PTT, and is committed to repay the debt with an accumulated 500mn bl of heavy sour Napo and medium sour Oriente grades and fuel oil through 2024, which leaves no crude surplus for spot sales.

The opaque oil-backed loans were signed during the 10-year administration of former president Rafael Correa, who left office in May 2017 amid widespread corruption suspicions.

State-owned PetroEcuador's goal now is to conduct at least one spot crude sale each quarter to establish a better price reference for Ecuadorean crude and to comply with a regulation that mandates that at least 10pc of Ecuador's exportable surplus of crude and fuel oil must be sold through the spot market.

Starting in 2010, Ecuador earmarked the bulk of its crude and fuel oil exports to fulfill the oil-backed loan contracts. In 2014, the country made a sole sale in the spot market after a three-year hiatus.

Since sitting president Lenin Moreno took office in May 2017, PetroEcuador has made three spot market sales. The first took place in September 2017, when Glencore won a contract to purchase 2.16mn bl of 24°Oriente with a $0.51/bl premium to the benchmark WTI price.

In January 2018, PetroEcuador awarded Repsol a contract to purchase 3.6mn bl of Oriente crude at a $0.18/bl discount to WTI. In March, Tesoro Refining won a contract to purchase 3.24mn bl of Oriente at a $0.61/bl discount to the WTI price.

"With these spot sales, Ecuador has managed to reduce the price discount to WTI from the $4/bl average discount at which we are selling our crude to the Chinese companies," Perez said.

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