PetroAmazonas steadies drillbit on lean purse: CEO

The greatest challenge facing Ecuador's state-owned PetroAmazonas is doing more with less, new chief executive Juan Carlos Bermeo told Argus in his first media interview.

"We have no choice but to be more efficient," said Bermeo, who took office on 3 February in place of Lenin Pozo.

PetroAmazonas accounts for around 80pc of the former Opec country's wellhead crude production, which fell to 514,000 b/d in January from 524,000 b/d in December, according to regulatory data.

Bermeo, who previously served as vice minister of hydrocarbons, says he is encouraged by the company's performance under difficult fiscal and social conditions.

While PetroAmazonas' 2020 budget of $2.9bn is up around 6pc from last year, it is a long way from a 2014 outlay of more than $4.7bn. And sinking international prices for Ecuador's medium and heavy sour Oriente and Napo crude grades, which are marketed by state-owned PetroEcuador, could mean a budget cut for PetroAmazonas later this year.

The company is targeting just over 437,000 b/d of crude production in 2020, up from close to 419,000 b/d in 2019, a year that was punctuated by two weeks of violent protests in October. The unrest, which was sparked by a cut in fuel subsidies that was later rolled back, knocked the company's overall monthly output to 378,500 b/d of oil equivalent, but it quickly bounced back to nearly 438,000 boe/d in November, thanks partly to its deep engagement with local communities, management says.

This year got off to a promising start, with 427,000 boe/d of output in January compared with a projected 421,000 boe/d. Development drilling and water injection are projected to ramp up flows to 453,000 boe/d in June before easing to 439,000 boe/d in December.

The company plans 139 development wells in 2020, up from 112 last year but down from a peak of 302 in 2013 when oil prices were double what they are now.

PetroAmazonas says that leaner funding has prompted the firm to become more creative, with a focus on workovers, fracturing and secondary recovery at mature fields such as Sacha and Auca that had been blocked during the October uprising.

The main driver of upstream growth this year is the ITT heavy crude complex, which has not developed as quickly as originally anticipated, partly because of permitting delays reflecting the deposit's proximity to the Yasuni national park. PetroAmazonas is currently producing around 72,000 b/d from the Tiputini and Tambococha fields, and plans to start drilling at Ishpingo in October-November, following 2019 regulatory approval of two platforms there.

Another challenge for Bermeo is lowering energy costs. The company saved close to $200mn last year by replacing diesel with generation based on associated natural gas that was previously flared, or with residual fuel. New transmission lines to connect with the national power grid are also in progress. But more needs to be done to boost reliability and savings, Bermeo says.

A shrinking part of the company's portfolio is natural gas. The Amistad field in the Gulf of Guayaquil that now produces about 28mn cf/d is expected to dwindle to just 8mn cf/d in as little as four years, impacting supply for power generation and asphalt production. The trend could lead Ecuador to start importing LNG, which would supply industrial needs as well.

In terms of social commitment, PetroAmazonas invested more than $128mn in the Amazon district last year, including $18mn in cargo transport that Bermeo notes is often led by women. Investment in the local community, anchored on the 2018 Amazonica regional development law, has a "multiplier effect" with broad implications for health and education, he says.

By Patricia Garip