Importance of Petroecuador’s Crude Oil Pipeline Highlighted During Recent Shutdown

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Researched by Industrialinfo.com (Industrial Info Resources; Houston, Texas). Last week, protests in Ecuador caused the closure of the OCP pipeline (Oleoducto de Crudo Pesado) located in the jungle region of Napo (100 miles east of the capital Quito), forcing Petroecuador, Ecuador’s state oil company, to invoke force majeure by suspending exports to ensure domestic supplies. Moreover, on February 20, 2006, protesters damaged the Salado pumping station, 55 miles east of Quito, also owned by Petroecuador, causing it to shut down its 380,000 barrel-per-day Sote Trans-Ecuadorean oil pipeline, suspending exports as well.

Force Majuere, which allows for the suspension of crude oil sales without sanctions from buyers, was declared in February 21, 2006 at 5:00 pm. This state of caution resulted from the previous day’s protest, where several people stormed into the Sardina pumping station shutting down Ecuador's main private oil pipeline, the OCP link. The pipeline has the capacity to transport 450,000 barrels per day from the Amazon region to a port on the Pacific coast; however, at the time of the stoppage the pipeline only carried 160,000 barrels per day.

Ecuador, which is not a member of the Organization of the Petroleum Exporting Countries (OPEC), is still the fifth biggest oil producer in South America producing 532,000 barrels of oil a day. The great majority of Ecuador's oil production fields are located in the country's western Amazon region. Around 35% of the government’s revenue comes from the export of crude through oil pipelines that run from the Amazon jungle to the Pacific ports.

Petroecuador uses the Sote Trans-Ecuadorian pipeline, a 312 mile link that can carry around 360,000 barrels per day, during this state of emergency to transport its crude from the Amazon region to the port of Balao in northwestern Ecuador. Protesters still are occupying the pumping station demanding more state resources for the extremely poor province in the Amazon region.

According to Petroecuador, operations in the Sardina pumping station resumed and exports were taken up again on February 23, 2006 by shipping 450 thousand barrels to Citizens Energy Corporation and Enca-Ecuador. Moreover, the OCP pipeline reopened this week after military officials checked for explosives in the Amazonian region of Napo. Due to the shutdown of the Sote Trans-Ecuadorean oil pipeline, Petroecuador could not export 275 thousand barrels of crude oil resulting in an $11 million loss. Taxes, exports, and royalties on the crude of these two pipelines account for 43% of Ecuador’s overall budget.

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