TBY talks to Luís García, E&P Director & Attorney-in-Fact at Repsol YPF, on Ecuador’s oil and gas industry, service contracts, and the possibility of new exploration areas.
TBY Repsol is the largest private oil company in the country. How significant is Ecuador for the company’s overall global activities?
LUIS GARCÍA Ecuador is very important; we are producing on average 45,000 to 50,000 barrels per day (bbl/d) as a consortium. The consortium owns 100% of the production, and Repsol has a participation of 55% in that. Thus, just over half of the volume of production is for Repsol. According to the contract signed by Repsol in 2010, the production belongs to the state and the state pays a fixed rate to the company. That’s the reason why I say that if we look at the situation in relative terms, the production that belongs to us, as Repsol, is very small for our capacity and of what we are able to manage when compared to other countries like Argentina, Venezuela, and even Bolivia, especially given the increase in gas production that the latter country is experiencing.
For what strategic reasons does the company maintain a strong presence in Ecuador?
Logically, we have a historic relationship with Ecuador; a relationship that nowadays is limited to the exploitation of Block 16, but we expect that in the future new growth opportunities will become obvious. We would like to have the opportunity to develop in new regions. There are some new areas that will be bid on, and we have an interest in studying the possibility of participating, and that will come in handy with the growing investments we want to make. We also have some other areas that we wish to develop such as to the south of our block, which is a new area that we are studying in order to develop it. It’s a small area, but it could prove interesting.
What’s your outlook for the oil and gas sector in Ecuador over 2012?
Fortunately, with the investments we made in 2011 and the future investments we will make until 2018, we will try to make the current production decline as harmless as possible.
In 2011, we had a few wells that provided better results than were initially estimated, and that has helped us to improve initial production estimations. Exploration can be tricky, and you never know what you will find 3,000 meters underground. For that reason we hope to be lucky in 2012 and explore areas with more potential than originally estimated. We may be able to maintain or improve our current production levels.
What is the value of the deals you have made with the government?
The new contract of service provision signed with the government in 2010, valid until 2018, comprises a total amount of investment of $320 million. That is the amount of investment we have planned until 2018. Most of it will be used in the first three years of the project, which is when we stage the biggest drilling campaigns. We will also analyze new options. If the government opens up new areas and we are able to obtain them, then it could lead to $50 million or $60 million in additional investment.
What challenges has Repsol faced in terms of remaining a leader in a sector crowded with foreign investors?
As in any country, a company like ours, which is involved in the extraction of natural resources, has to make its decisions in partnership with the government. We do have a full disposition to work with the government by participating in any new event that may appear in the future, such as the new areas that may open up in the south of the country. We are studying them because they are also close to some areas in the north of Peru that we are working in. On the government side, there has to be trust in the companies that can achieve this kind of development, and it does exist. It is also present at the ministry level, where we work very closely. However, all of this depends on what conditions the government will tender these areas under. Such a close relationship with the government will allow us to continue working here successfully.
© The Business Year