UPDATE 1-Ecuador state oil firms see merger on track, output up

Fri Nov 16, 2012 3:17am IST

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* Ecuador sees output increasing to 546,000 bpd in 2014

* Petroamazonas will control upstream operations

By Eduardo Garcia

QUITO, Nov 15 (Reuters) - Ecuador's state-run oil firms Petroecuador and Petroamazonas are close to merging their upstream operations, which should let the OPEC-member country increase output in the future, energy officials said on Thursday.

The merger, announced in October 2011, will have Petroamazonas in charge of all upstream operations, including the six blocks (fields) it already runs as well as eight blocks operated by Petroecuador, which will become the state's downstream oil company.

Ecuador's state-run companies produce about 370,000 barrels per day (bpd), or 73 percent of the country's total output, which currently stands at 509,000 bpd.

Petroamazonas' manager Oswaldo Madrid said that a decree calling for the official merger would come into effect shortly.

"Since we've already taken the necessary steps we're 100-percent ready for the transfer of operations that will happen in the next few days," Madrid told reporters.

He said Petroamazonas, which controls assets seized from Occidental Petroleum in 2006, is studying how to optimize production in Petroecuador's fields.

"Production in the fields that will be passed on to Petroamazonas can be improved ... we'll see the increase in the second or third year," said deputy oil minister Ramiro Cazar, adding the government sees output rising to 546,000 bpd in 2014.

Petroamazonas will also take charge of Petroecuador's stake in Rio Napo, a joint venture with Venezuela's state-run company PDVSA, that is currently producing 65,000 bpd.

Meanwhile, Petroecuador will be in charge of the downstream sector, which includes a key oil pipeline and three refineries, as well as the $12.5 billion Pacifico refinery project -- a joint venture with PDVSA.

Petroecuador head Marco Calvopina said that the two companies have invested around $500 million in the refinery project and that talks with the Chinese government over financing have advanced substantially.

However, he said Petroecuador is also in talks with a German company and with South Korea over financing.

In 2010 leftist President Rafael Correa, an ally of Venezuela's socialist President Hugo Chavez, asked oil companies to sign less profitable service contracts or leave the country.

Since then, foreign oil companies have not invested in exploration or to increase production, but investments made in state-run oil fields have allowed Ecuador to increase output slightly since 2010.

Ecuador is set to put exploration rights for 13 blocks up for auction on Nov. 28, and has put aside three promising blocks for Petroamazonas, which could allow the country to further increase output in the medium term.

Ecuador is OPEC's smallest member and it expects average oil output to rise to 530,000 bpd in 2013, up from a target of 510,000 bpd in 2012.

Higher crude prices have allowed Correa to hike social spending in recent years, which in turn has boosted his popularity among the country's poor majority ahead of a presidential election scheduled for February 2013.

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