All 2017 oil revenue will go to pay debt, says energy minister; Contract renegotiation underway

Although the price of oil is increasing, Ecuador will not enjoy the benefit — at least not in 2017.

The Esmeraldas oil refinery processes about 40% of Ecuadorian crude.

Ecuador Energy Minister Carlos Pérez says oil revenue for the year has been committed to pay debts. “All the income from the 120 million barrels we produce will go for the debt this year, and we will not be able to benefit from spot sales based on the higher prices,” he says. “This is based on international agreements and contracts with Petrochina, Unipec, and Petrotailandia.”

Pérez says the situation will change in 2018, as the government will again collect additional oil revenue, although about 50% will still be committed to debt payment. He adds that by 2024, more than 80% of oil revenue will go into public coffers. “The rest will continue to be used to fulfill the commitments acquired by the previous government,” he said.

Former energy minister Fernando Santos claims that the government of former president Rafael Correa made bad deals with oil companies. “They locked in lower prices over a longer term and that’s costing the current government money,” he said. “They made an assumption that the price of oil would remain in the $30 range for several years.”

Based on international market calculations, Ecuador crude is currently valued at $53 a barrel.

Perez agrees with Santos and says said he is negotiating with Petrochina and Petrotailandia to improve contract terms. “We are being punished by the price differential based on the old contracts and are looking for modifications that are more advantageous for the country.”