Ecuador seeks to peel oil off of China debt

Ecuador's president Guillermo Lasso travels to China on 3 February to renegotiate some $5bn in debt, including $2bn in pre-paid crude sales.

The government is hoping to sever the oil sales from the debt to free up supply for more cash-generating market sales. It also wants to cut interest rates and reschedule looming maturities.

"We seek to extend the payment deadlines, improve the conditions and make the debt agreements more transparent," Ecuador's finance minister Simon Cueva said today.

He declined to specify how much of state-owned PetroEcuador's crude exports are tied into the loan obligations.

The company normally conducts monthly spot sales of medium sour Oriente grade and heavy sour Napo. Typical buyers include Trafigura, Shell Western and China's state-owned Unipec and PetroChina. Norway's Equinor is also an occasional participant.

Since 2008, Ecuador has signed more than 15 oil-backed loans with China, a legacy of former president Rafael Correa's 2007-17 administration. Under the terms of the interest-bearing loans, China pays for the crude in advance. Ecuador services the loans with crude exports.

Cueva said Ecuador's crude production has bounced back from a December crisis caused by an erosion threat to the country's two main export pipelnes. Output is running around 465,000 b/d, not including storage withdrawals and internal transfers, around the same level as last year, according to data from energy regulator ARC.

Rising oil prices have helped Ecuador's treasury to compensate for the force majeure that ended early this month, Cueva said.

By Alberto Araujo