PROMOTION // ECONOMIC DEVELOPMENT

2013 promises to be a milestone year for the Ecuadorean

hydrocarbons industry. The new bidding round—called Ronda

Suroriente Ecuador, or Ecuador Southeastern Round—for oil

blocks in the country’s southeast will begin on November 28,

2012, with tendering scheduled for next May and contracts

expected to be inked in the third quarter of the year. With 13

blocks up for offer, a new era of exploration is about to begin

in Ecuador.

“We did not explore enough in the last 15 years,” admits

Wilson Pástor, the country’s Minister of Nonrenewable Natural

Resources. “The last bidding process was in 1995. Reserves are

in remission and our challenge is to attract foreign investment.”

Doing so should not prove too difficult a task, with an esti-

mate of between 370 million and 1.6 billion barrels of reserves

ripe for discovery in the area, according to studies carried out

by the French Institute of Petroleum and Ecuadorean experts.

Only three blocks on offer hold proven reserves, amounting to

just over 100 million barrels, with 2-D seismic data carried out

on 12 of them.

ECUADORNEW OPPORTUNITIES ARISE

Bidding round for hydrocarbons set to boost exploration and foreign investment

PROMOTION 2 // ECUADOR

Ecuador’s Hydrocarbons Secretariat

(known as SHE) is the entity overseeing

the Ecuador Southeastern Round. Set

up in July 2010 under the terms of the

July 2010 Hydrocarbons Law, SHE is

responsible for the nation’s hydrocarbon

resources, including the administration

and amendment of contracts.

“The Secretariat will guide investment

in the oil and gas business in Ecuador,”

says Hydrocarbons Secretary Andrés

Donoso Fabara. “SHE is the equiva-

lent of Colombia’s National Agency of

Hydrocarbons (ANH) or Brazil’s National

Agency of Petroleum, Natural Gas and

Biofuel (ANP). The message we want to

convey is to present ourselves as part-

ners. Our position is to help investment

in the sector.”

Minister Pástor expects investment

in each of the blocks up for bidding

to reach as much as $200 million.

Approximately three-quarters of the

blocks will be available to international

oil companies, while the remainder will

be reserved for state-owned operators

from neighboring nations and Ecuador’s

own Petroamazonas.

Once it begins to flow, oil from the

southeastern blocks will have a fast-

track route to markets, thanks to an

agreement signed this August between

Peru and Ecuador. Operators will have

access to the North Peruvian Pipeline to

ship crude to the Pacific Coast. Minister

Pástor called the deal, which will cost

Ecuador an estimated $10 per barrel,

“true energy integration.”

After a couple of years of uncertainty

in the industry, Ecuador has rewritten

the rules of engagement. The coun-

try’s new Constitution, passed in 2008,

declared oil a strategic asset subject to

state control, changing the playing field

for private-sector organizations. At the

time, foreign-owned firms produced

44% of the nation’s output.

Under the recent hydrocarbons leg-

islation that Minister Pástor helped

push through, the state owns 100% of

production and is paid the first 25%

CORPORATE PROFILE

HYDROCARBONS SECRETARIAT: The Industry’s Partner in Development

The Hydrocarbons Secretariat of

Ecuador (SHE) was established in

July 2010 as the entity in charge of

the country’s oil and gas resources,

and it serves as the industry’s partner

for development. Its responsibilities

include negotiating, amending and

administering contracts; offering

technical, financial and legal sup-

port; and analyzing and quantifying

Ecuador’s existing and undiscov-

ered assets.

Led by Hydrocarbons Secretary

Andrés Donoso Fabara, a lawyer

by training with extensive indus-

try experience, the Secretariat

has its hands full for the next few

years, overseeing the reorganiza-

tion of state-owned companies and

financing projects like the Refinería

del Pacífico. Efficiencies gained

and extra revenue generated will

be used to reduce the country’s fuel

subsidy below 2011’s $2.5 billion.

The Secretariat is also in charge

of promotion to attract regional

and overseas capital to the sector,

including the organization of bid-

ding rounds for new leases. Among

the projects on its agenda are the

reinforcement of the Ecuadorian

Oil Data Bank (BIPE), including 2-D

and 3-D seismic data, well logs

and geographical information. It

aims to provide the industry with

a one-stop source of knowledge

to facilitate decision making and

investment.

At the same time, SHE will con-

duct studies to evaluate potential

resources, exploring more than

67,000 square kilometers off the

coast of five provinces to map

the whereabouts of an estimated

1 billion barrels of crude. And in

2013, it will begin a study for non-

conventional shale

deposits onshore

and offshore.

COLOMBIA

PERU BRAZIL

VENEZUELA

BOLIVIA

PARAGUAY

GUYANASURINAME

FRENCH GUINEA

URUGUAY

CH

ILE

ARGENTINA

COLOMBIA

PERU

Ecuador’s Southeastern Round: The orange area represents

the 13 oil blocks up for licensing.

ECUADOR’S OIL CONCESSIONS

Quito

PROMOTION 3

In a recent interview for this

report, Ecuador’s Minister of

Nonrenewable Natural Resources,

Wilson Pástor—a well-respected

hydrocarbons professional with

more than three decades’ experi-

ence in the sector—spoke about

the future of the country’s oil

industry. Pástor has held a variety

of public- and private-sector roles,

in addition to working as a consul-

tant for the World Bank, and is a

prolific author on Ecuadorean oil

issues. The discussion focused

on the issues facing Ecuador’s oil

industry in the years to come. The

following are some of the high-

lights of that conversation.

ON FUTURE PROSPECTS“I see two lines of development:

The first is to increase explora-

tion; the second is to improve oil

recovery with enhanced tech-

niques. We have signed important

service contracts with some of

the best-known companies, like

Schlumberger, and are going to

extend this for other fields. This

approach, however, has limits, as

we can only improve so much. The

only solution is to increase invest-

ment in exploration and improve

the recovery of reserves.”

ON PLANS FOR STATE-OWNED COMPANIES

“Achieving efficient costs depends

on the situation of Petroecuador

and Petroamazonas. We consider

Petroecuador a more powerful com-

pany downstream that can operate

not only in Ecuador, but internation-

ally in countries like Peru. On the

other hand, Petroamazonas, which

has better international practices,

will take over exploration and be in

charge of upstream.”

ON EXPORT PRODUCTION“Ecuador is now net-exporting

yearly around 120 million barrels,

approximately 60% of our produc-

tion. As internal demand grows in

the medium term, by the end of the

decade we might not be exporting.

This is due not only to field slow-

down and decreasing reserves, but

also to the new refinery, Refinería

del Pacífico, which will produce

300,000 bpd. My vision is optimis-

tic, however, as we have reserves

that are not yet developed. This

is very heavy oil, and some com-

panies would like to invest and

produce up to 200,000 bpd by

applying a new technique using

nitrogen.”

Ecuador Section Project Managers: Eduardo Magaña and Maria Cristina Nadolu

For more information, contact: Gabriel Gutierrez – g.gutierrez@forbes-cm.com

www.forbescustom.com/ecuador

All statistical data as stated was provided

by the sponsors of this report.

Q&A WITH MINISTER WILSON PÁSTORA look at the future of Ecuador’s oil industry

of income from sales. The decision

was also made to replace existing pro-

duction-sharing contracts (PSCs) for

service contracts, with a flat fee paid per

barrel produced, which could be easily

calculated as conditions and costs were

clear.

“With PSCs, we did not control the

price, and that has been increasing at a

very high rate in real terms,” the Minister

explains. “This generated an imbalance

in the share of profits. The government

wanted to stabilize this and fix a price

that would represent the real conditions

of the field and production.”

A deadline for renegotiation with

majors was set for November 2010, with

smaller companies given until January,

at the risk of forfeiting fields, subject

to compensation, if deals could not be

reached. By the end of the process,

14 of the previous 21 contracts were

signed, providing operators with an

average 15% rate of return at a tariff per

barrel of just over $32.

At present, Ecuador produces about

510,000 barrels per day (bpd) and has

proven reserves of around 3.5 billion bar-

rels, according to official data. Minister

Pástor expects output to increase by

4.7% to 526,000 bpd next year, rising to

530,000 by 2014.

The combination of political stabil-

ity, exploration opportunities and a

well-defined framework for business

has led to a resurgence of interest in

Ecuador’s oil sector, fueling a climate

of confidence ahead of the Ecuador

Southeastern Round. More than $1.4

billion in investment has already been

committed across the sector over the

next three years. “I see two lines of development: The first is to increase exploration; the second is to improve oil recovery with enhanced techniques.”

Political stability, exploration opportunities and a well-defined framework for business has led to a resurgence of interest in Ecuador’s oil sector.

Rona

ld Z

ak/

/AP/

Corb

is

PROMOTION 4 // ECUADOR

TRANSFORMING POLITICAL WILL INTO LEGAL GUARANTEES

“Since President Rafael Correa has

been in power, Ecuador has had the

longest stability in many years,” says

David R. Martin, the CEO of Gente Oil

Global and a 50-year veteran of the

international oil industry. “This means

we have an administration working with

Congress and coming up with laws and

regulations that are clear—all made

possible because of political stability.”

Among the raft of legislation the Correa

government has passed since tak-

ing office in 2007, the new Constitution

of 2008 and reforms to the 1978

Hydrocarbons Law in July 2010 represent

the clearest expressions of the adminis-

tration’s intent to ensure that Ecuador’s

riches are exploited to the benefit of the

nation.

Article 1 of the Constitution specifically

states, “Nonrenewable natural resources

in the state’s territory form part of its

inalienable and absolute assets, subject

to no statute of limitations.” Subsequent

articles deal with the strategic nature of

resources and the state’s exclusive pow-

ers over hydrocarbons, including those in

its territorial waters.

The 2010 amendments to the Hydro-

carbons Law, which was originally passed

in 1978, encompass the state’s respon-

sibility for exploration and production,

joint ventures, agreements with overseas

state-owned oil companies, and the bid-

ding process for leases, overseen by the

Committee for Hydrocarbon Tenders.

The reform also lays out the rules for

private-sector participation in cases

where SHE deems that state-owned

companies do not have sufficient tech-

nological or economic means to explore

or exploit certain areas. In these cases,

SHE is the body responsible for sign-

ing contracts and ensuring that they are

executed correctly.

The principles underlying Ecuador’s

hydrocarbons policy are as follows:

the preservation of national interests

at every level of the industry; environ-

mental respect and sustainability; guar-

anteeing supply; consumer protection;

prioritizing technological development;

promoting exploration; contributing to

industrialization; attracting investment;

developing scientific, technological and

human resources; and improving the

country’s competitiveness on a global

scale.

Repsol YPF Ecuador, the local subsid-

iary of the Spanish hydrocarbons giant,

is one of many major international orga-

nizations confident about the future of

the industry in Ecuador: “We decided to

continue operations here because there

were clear rules to continue in the coun-

try,” says Managing Director Luis García

Sánchez.

CORPORATE PROFILE

ENAP SIPEC IN ECUADOR: A Success Story

ENAP Sipec Ecuador, a subsidiary of the Chilean state-

owned company ENAP SIPETROL, began its operations in

Ecuador in 2003 after Chile and Ecuador signed agreements

for energy-sector cooperation, particularly in hydrocarbon

exploration and development.

Established in 1990, ENAP SIPETROL develops hydro-

carbon exploration and production activities in foreign

countries, taking advantage of ENAP’s professional and

technical teams in search of new business opportuni-

ties outside Chile. At present, it is active in production in

Argentina, Ecuador, Egypt and Chile.

Shortly after its establishment, ENAP Sipec began to

develop two oil fields—Paraiso, Biguno, Huachito (PBH)

and Mauro Davalos Cordero (MDC)—boosting production

to a peak of 22,000 bpd by applying 3-D seismic technol-

ogy, putting in place a drilling program and building new

facilities.

Ten years later, having invested more than $230 million,

ENAP Sipec has extracted over 50,000,000 barrels of oil

from PBH and MDC. More important, the company has

implemented numerous social projects with native com-

munities, focusing on health, education and sustainable

projects. It is ISO 14001 certified and operates a reforesta-

tion program for native species.

Over the last two years, relations between Ecuador and

Chile have improved and the Ecuadorean government

has developed new practices, including the renegotia-

tion of contracts to adopt a new model, known as Service

Contracts, which ENAP Sipec was the first to reach. ENAP

Sipec also signed an agreement with Ecuador’s Minister of

Nonrenewable Resources in November 2010, committing

to new investments, such as an enhanced recovery project

and exploration of a new area called Intracampos.

Consolidating these successes, in October 2011 the

Ecuadorean government and ENAP Sipec signed a new

Service Contract for Block 3J, located near the Gulf of

Guayaquil. It is a huge exploration area that will bring great

benefits to Ecuador, with fresh discoveries in a part of the

territory that to date has been only partially developed. All

this has been achieved, thanks to negotiations in which

Ecuador and Chile share the same goal: to increase ENAP’s

presence in Ecuador with greater investment and technol-

ogy, and to harness potential development in reserves and

production to provide direct benefits to Ecuador.

PROMOTION 5

CHANGE TO CONTRACT MODEL FIXES RATES OF RETURNCompanies can enhance profitability by raising production or lowering operating costs.

The biggest change for private-

sector oil companies working or

planning to work in Ecuador has been

the introduction of service contracts

for exploration and production, rather

than the production-sharing agree-

ments more commonly used worldwide.

The latter expose companies to greater

risk, but, once production begins, allow

operators to offset capital expenditure

before generating profit, at which point

payments accrue to the state.

Soon after coming to power, in light

of spiraling oil prices that benefited

the companies more than the country,

President Rafael Correa decreed that

Ecuador should earn more from the

exploitation of its crude. A 99% wind-

fall tax was imposed, and then it was

lifted following the 2008 financial crisis

when prices plummeted to $30 per bar-

rel, before his administration pushed

forward with plans to alter existing

agreements to pay privately owned pro-

ducers a flat fee per barrel.

As a result of the shift —part of the

reforms made to the Hydrocarbons Law

in July 2010 and implemented via negoti-

ations completed by the start of 2011—oil

companies already active in Ecuador can

make more money by raising production

volume, using existing infrastructure or

lowering operational overheads.

Minister Pástor explains the thinking

behind the change: “We wanted to give

companies a price that would be prof-

itable, with the objective being a 15%

rate of return. This is only for contracts

in production. For new ventures, com-

panies propose a tariff according to

their estimations related to reserves and

production,” he explains. “Because risk

is involved, they can get up to 30% as a

rate of return, so it is much more flexible

and open.”

At the same time, for private-sector

companies working with Petroecuador

on its blocks, integrated service contracts

have been put in place that allow global

organizations like Schlumberger to provide

investment, technology and know-how to

optimize production, improve recovery

rates and aid with exploration.

Rates of return on this kind of con-

tract, fixed for a 15-year term, vary from

15% for optimization services to 25%

for enhanced recovery or exploration.

Payment is made according to an estab-

lished rate per barrel, subject to a base

curve agreed upon by Petroecuador

and the service provider.

REGIONAL COOPERATION PAYS OFF FOR ALL CONCERNEDEcuador begins pumping Colombian crude, while Peru carries Ecuador’s oil to market

Aside from extending exploration

and increasing production at home,

the domestic oil sector is looking to

develop ventures and create synergies

with its counterparts in neighboring

nations. The administration already

has deals in place with every country

along the Pacific seaboard and aims

to foster new relationships in both

upstream and downstream activities.

La Empresa Nacional del Petroleo

(ENAP), Chile’s state-owned giant, was

the first overseas company to sign a

new contract in 2010. The company

pumps 14,500 bpd, and in August it

celebrated producing 50 million barrels

in under a decade. It has invested $230

million in Ecuador to date, and in 2011

it added Jambelí Block 3, located in the

Gulf of Guayaquil, to its interests.

Petróleos de Venezuela, SA (PDVSA)

has worked with Petroecuador in

Ecuador’s Amazon region since 2009.

“Some $374 million will be invested

in the Río Napo Operations joint ven-

ture next year to raise output to 80,000

bpd by 2015,” says Patricio Román,

Río Napo’s general manager. In April,

Petroecuador revealed plans to take

a 14% stake in Venezuela’s Dobokuki

field, where production should reach

50,000 in two years, according to

Petroecuador General Manager Marco

Calvopiña.

In June, Oleoducto de Crudos

Pesados (OCP), Ecuador’s pipeline

company, announced that it would

begin transporting 15,000 bpd of

Colombian crude by the end of 2012,

with the possibility of a tenfold expan-

sion in three years. OCP operates

the 475-kilometer Heavy Crude Oil

Pipeline that runs from the Sucumbíos

region to the Pacific. This could also

be the first step toward a connec-

tion for both nations with Venezuela’s

Llanos pipeline.

“The southeast of Colombia has huge

reserves but lacks transportation,”

explains Minister Pástor. “We have the

OCP pipeline that has a capacity of up

to 450,000 bpd. We are currently trans-

porting only a third of this, so Colombia

is interested in moving the oil they have

through this pipeline.”

And this past August, Pástor inked

a deal with Peru to connect pipe-

lines in a $300 million project to ship

Ecuadorean oil to Peru’s Pacific ports.

The agreement opened the door for

PetroPeru, the national oil company,

to take part in Ecuador’s bidding round

in November, as it plans to return to

upstream activities.

Pástor inked a deal with Peru to connect pipelines in a $300 million project to ship Ecuadorean oil to Peru’s Pacific ports.

President Rafael Correa

epa european pressphoto agency b.v. / Alam

y

PROMOTION 7

STATE-OWNED OIL GIANTS READY FOR REORGANIZATIONInvestments in innovative technology at heart of exploration and refinery initiatives

Scheduled for completion over the next couple of years,

the reorganization of Ecuador’s state-owned oil compa-

nies, Petroamazonas and Petroecuador, aims to reinforce

each as a regional leader in its field. While Petroecuador will

focus on developing downstream projects, Petroamazonas

is set to capitalize upon both organizations’ experience in

upstream activities.

By the end of the year, Petroamazonas plans to have

drilled more than 90 new wells across the five fields

it operates, as part of a

$1.25 billion investment to

expand its current output of

160,000 bpd. At the Oso 54

and 59 wells, located on the

Napo and Orellana blocks,

Petroamazonas began using

a new multilateral drilling

technique last August to

boost production and limit

environmental impact.

According to company

sources, two branches will

extend out from a single

mother bore to cover a larger

area and should start pro-

ducing crude by November.

This approach has been

used successfully in China,

Venezuela and the North Sea

and is 96% effective.

“Our operational and economic indicators show

Petroamazonas has everything that an international oil

company needs to face these projects,” says Oswaldo

Madrid, the company’s general manager. “We have

enormous strengths, because we have the highest inter-

national standards in the oil industry.”

For its part, Petroecuador is concentrating on devel-

oping the country’s pipelines, refineries, ports and trade

to ensure that Ecuador remains well positioned in the

downstream sector. Among the projects on its to-do

list is the Refinería del Pacífico, a 300,000-bpd refinery

scheduled to come into operation by the end of 2015.

A joint venture with Venezuela’s PDVSA, the $12 bil-

lion project is still at the financing stage. This August,

Petroecuador began conversations with China National

Petroleum Company (CNPC) about acquiring a stake in

the new facility.

“Our challenge is to find a shareholder,” says Jorge

Glas, Ecuador’s Minister of Strategic Sectors. “We hope

to reach an agreement with CNPC, but if it doesn’t hap-

pen, we will look for another partner. Other companies are

interested.”

TAKING COMMUNITIES AND CONSERVATION INTO ACCOUNT

Managing resources to protect bio-diverse region

Wherever they oper-

ate in the world today, oil

companies come under

increasing scrutiny to

ensure that they do not

have a negative impact

on the people and the

places in which they

work. While the world

may demand an endless

supply of cheap crude

to fuel economic development, politicians and the

public alike are no longer prepared to pay any price—

either monetary or environmental—for petroleum.

Under President Rafael Correa’s leadership,

the Ecuadorean government has clearly signaled

its intent to protect environmental and human

rights above the potential benefits it could accrue

from exploiting its oil. With its Yasuní-ITT initia-

tive, launched in 2007, the government proposed

an indefinite halt to production at the Ishpingo-

Tambococha-Tiputini (ITT) field, located within

Yasuní National Park. In exchange, it asked that

the international community fund 50% of the

deposit’s value.

ITT contains 846 million barrels, around 20% of

Ecuador’s proven reserves, valued at $3.6 billion. The

problem is where it lies: in one of the richest areas of

biodiversity on the planet. Two acres in Yasuní con-

tains more tree species than all of North America.

Leaving oil in the ground and trees in the forest will save more

than 1,200 million metric tons of carbon emissions.

Ahead of the country’s Southeastern Round, which begins

in November, the Ministry of Nonrenewable Natural Resources

directed Ecuador’s Hydrocarbons Secretariat (SHE) to col-

lect and analyze data from the Amazon provinces of Pastaza,

Morona Santiago, Napo and Orellana to produce a socio-

environmental diagnosis of those areas that oil production

activities would affect.

Adopting a holistic approach, SHE undertook a detailed sur-

vey of environmental parameters, including air quality, rainfall

and climate data, noise pollution, hydrological resources, land

use and ecosystems, to determine what kind of regulations

would be required to maintain existing conditions.

At the same time, a process called Prior Consultation

(Consulta Previa), which brought together local authorities

and communities, included opportunities for dialogue by

means of meetings and workshops to ensure that citizens’

rights were upheld and their opinions heard. The conclusions

of the analysis have been used to inform public policy about

how best to manage the region’s resources from a human and

environmental perspective.

PROMOTION 8 // ECUADOR

CORPORATE PROFILE

Upstream Giant to Expand Exploration and Production

The state-owned company Petro-

amazonas EP is responsible for

Ecuador’s national exploration and

production interests in the strategi-

cally important hydrocarbons sector.

Petroamazonas was set up under the

Public Enterprise Act in April 2010

and was granted financial and man-

agement independence.

Petroamazonas operates Blocks 7,

12, 15, 18 and 21, and is working on

the development of Block 31. Actual

proven reserves are 300 million bar-

rels, and, with 14 exploratory wells

in its program, Petroamazonas EP is

planning to increase reserves by an

additional 100 million barrels in 2013.

At present, Petroamazonas pro-

duces 160,000 bpd, close to a third of

total Ecuadorean oil production. Over

the five-year period ending in July

2012, the company posted revenues

in excess of $13.2 billion.

Petroamazonas is committed to

exploiting its reserves efficiently, safely

and sustainably, and its operations

are ISO 9001, ISO 14001 and OHSAS

18001 certified. The company is also

keenly aware of its social and environ-

mental responsibilities, and of its role

as a major contributor to development

in the country’s energy sector.

An example of this approach is

its Power Generation Optimization

Project (OGE) initiative in developing

in the country’s Amazon district. The

first project of its kind in Latin America,

OGE promotes the use of gas asso-

ciated with oil extraction to generate

electricity, providing cost savings and

reduced emissions, and thereby miti-

gating the company’s carbon footprint.

Petroamazonas has recently initiated

conversations with other state-owned

petroleum organizations in the region,

such as Ecopetrol and Petroperu, to

develop joint ventures and invest-

ment opportunities within and beyond

Ecuador’s borders. At the same time,

at home it will be taking part in the

Southeast Bidding Round to acquire

new blocks for exploration.

The Petroamazonas EP merger

with the Petroecuador Exploration

and Production division, scheduled

for the fourth quarter of 2012, marks

an important milestone in its devel-

opment and growth, and reflects

confidence in its management. The

company will focus on upstream

operations, with a production fore-

cast of 320,000 bpd and assets worth

around $3 billion.

CORPORATE PROFILE

Downstream Leader Focuses on Raising Sector’s Capacity

Established in 1989, EP Petro-

ecuador (the State Oil Company

of Ecuador) is the country’s lead-

ing hydrocarbons company. It

produced almost 200,000 bpd in

the first six months of 2012.

By the end of this year, it will

become the organization respon-

sible for the nation’s downstream

interests—including transport, dis-

tribution, refining and marketing—as

the result of a planned moderniza-

tion process with Ecuador’s other

state-owned petroleum company,

Petroamazonas EP.

According to General Manager

Marco Calpoviña, the company’s

goal is to evolve into a net exporter

of high-quality finished products.

To do so, Petroecuador aims to

build a new $12 billion refinery,

in cooperation with Venezuela’s

PDVSA and other partners, by

2016. It will have a capacity of

100,000 bpd for the production of

basic petrochemicals such as pro-

pylene and xylene.

Petroecuador is the leader in

fuel-oil sales in Ecuador and man-

ages the Trans-Ecuadorian Pipeline

System (SOTE). It is planning to

construct a connection to Colombia

to complement the link already in

place to Peru for when production

begins in the country’s south.

CORPORATE PROFILE

Ecuador’s New Energy Promise

Operaciones Río Napo CEM is a joint venture

between Petroecuador and Venezuela’s PDVSA, which holds 30% of the com-

pany. Created in July 2008, its goal is to develop interests at every level of the

industry, but the company’s primary mission is to increase production at the

Sacha field in the northeastern province of Orellana by leveraging the ongoing

exploration of deposits and reserves and the introduction of new technology.

Sacha contains proven reserves of 400 million barrels, according to Río Napo

General Manager Patricio Román, and has the potential to reach more than 500

million barrels, making it the country’s highest-producing field. Current output

stands at 61,400 bpd, with a goal of reaching 70,000 by the end of 2012.

Next year, Río Napo aims to introduce more-advanced processes and new

techniques to improve its production and

increase reserves. The goal is to propel itself

into the upper echelons of the industry with its

quality product and to explore export oppor-

tunities to Asia and Russia, says Román.

PROMOTION 9

CORPORATE PROFILE

SCHLUMBERGER: A Proud Past and a Bright Future

Schlumberger is a global leader

in technology, project management

and information solutions for oil and

gas clients, and is active in 85 coun-

tries, employing 115,000 people

worldwide. The company invested

$1.1 billion in R&D last year, and

maintains a network of six research

laboratories in the United States, the

United Kingdom, Russia, Norway,

Saudi Arabia and Brazil.

Schlumberger delivers the indus-

try’s widest range of products and

services, including seismic and

geophysical services, wireline log-

ging, drilling services, well services

such as cementing and stimula-

tion, testing and subsea, coiled

tubing and slickline, interpreta-

tion and consultancy, specialized

software solutions and integrated

project management.

Present in Ecuador since

November 1934, when it ran the

country’s first electrical log on

Ancon’s Doña Santa Elena field,

Schlumberger has played an active

role in many of the Ecuadorean oil

industry’s successes. For more than

seven decades, it has been instru-

mental in helping domestic and

international oil companies achieve

their goals.

Schlumberger has expanded its

portfolio in Ecuador, keeping pace

with the latest technology, to ensure

that it exceeds clients’ requirements.

The company believes in shar-

ing know-how and has established

relationships with local experts and

universities, benefiting multiple gen-

erations of Ecuadorean professionals.

The company also collaborates

with educators in underprivileged

areas to inspire Ecuador’s youth

to study science and technology.

The Schlumberger Excellence in

Educational Development (SEED)

nonprofit program is currently

active in 15 Ecuadorean schools.

Serving industry and community

alike, Schlumberger remains com-

mitted to advancing Ecuador’s

interests over the long term.

Exploration success rates make good on nation’s promise and unexplored fields offer growth potential

While international oil companies

considering taking part in Ecuador’s

Southeastern Round may be under the

impression that doing business here

is a risky or uncertain proposition, the

success rate that producers already

working in the country are enjoying

should make them think again.

Looking at some of the compel-

ling developments in the sector,

Schlumberger’s Guillermo Jalfin, the

vice president of Business Devel-

opment and New Ventures Latin

America, commented on Ecuador’s

many opportunities: “There’s the drive

to increase national oil production,

which is reversing the trend of declin-

ing production in mature fields; the

will to encourage overseas investment

and create a new business model; and

the access to new technologies as a

requirement for participating in the

process.”

That’s not just talk. The Paris-based

oil services company is putting its

money where its mouth is, committing

to investments of nearly $1.3 billion over

the next five years under the terms of a

production-incentive contract signed in

February with Petroecuador. It will drill

72 development wells and 107 work-

overs, and expects to raise production

from 43,000 bpd to 60,000 bpd.

David Martin, an oil industry leader

and the CEO of Gente Oil Global,

agrees: “Exploration risk is a lot dif-

ferent than it was years ago. It has

been cut substantially by new tech-

nologies. There are no ‘dry’ structures

in Ecuador. They may not be easy to

exploit, as these fields are in solid

jungle and there is no infrastructure.

But the technology is there; one

just has to be careful to protect the

environment.”

Chinese oil companies, which have

been active in the local market for

less than a decade, provide a great

example of how even newcomers

can prosper in Ecuador, according to

Peng Tao, the economic attaché at

the Chinese Embassy in Quito. She

believes the two nations’ complemen-

tary advantages in terms of financing,

technology, resources and markets

will lead to win-win outcomes.

“Andes Petroleum Ecuador and

PetroOriental—a joint venture between

two Chinese oil companies, China

National Petroleum Corporation (CNPC)

and China Petrochemical Corporation

(SINOPEC)—operates the Tarapoa and

PetroOriental blocks,” Peng says. “The

successful application of production and

exploration techniques has maintained

production levels for the last seven

years.”

EXPERTS EXPRESS CONFIDENCE IN ECUADOR’S PROSPECTS