Category: Regions

Ecuador has asked for a grace period of six months before starting to pay for 660,000 barrels of crude oil to be supplied by Venezuela. State-owned firm Petroecuador had to suspend its oil exports last Thursday due to a protest in two oil-rich provinces in the Amazon. The energy ministry says crude oil production has returned to 84 percent of normal.

Standard & Poor’s warned it may cut Ecuador’s ‘CCC+’ long-term sovereign credit rating as heightened political risk increases doubts over the country’s ability to pay its debts. Protesters last week crippled the country’s oil industry and helped jack up petroleum prices by dynamiting pipelines and vandalizing pumping equipment at installations of state-owned Petroecuador in the eastern part of the country. The Ecuadorean army has moved into the area and the government is working to get crude production back on-line.

Venezuela´s President Hugo Chavez offered to provide Ecuador with free oil, which Quito will return with its own crude when its production is restored. Chavez also said he would like Ecuador to be a member of the Petroandina system, wherein member countries would help each other deal with decreased production caused by strikes or other shocks. Venezuela´s own PDVSA suffered a crippling strike in late 2002 and early 2003.

Ecuador´s government opened talks with protest leaders who have choked off the country´s oil exports, but officials said a full recovery in production was a long way off. Oil exports remain suspended Monday but production has risen as the army took control of oil fields that had been under siege, allowing workers to repair damage. Output by state-controlled Petroecuador totaled 70,000 barrels Monday, compared to Saturday´s 33,000 but well under the 200,000 bpd level before the protests began last week. Ecuadorean Energy Minister Ivan Rodriguez said some oil wells may have been permanently damaged by the attacks and may be unable to return to normal activity.

Ecuador´s military opened roads and bridges that protesters had taken over in the northeastern provinces of Orellana and Sucumbios as part of last week´s strike that crippled oil production. State-run Petroecuador says 30 of 400 wells are back online, but claims to have lost 740,000 barrels of crude due to the strike. Private oil production, which normally is 340,000 b/d, also was cut by more than half as protesters sabotaged electricity lines and control valves, and dynamited a pipeline. Strikers backed by local authorities are calling for the government to back up promises to use oil revenue for social projects.