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Ecuador 2013 | ENERGY & MINING | INTERVIEW

TBY talks to Andrés Donoso Fabara, Secretary of the Secretariat of Hydrocarbons of Ecuador (SHE), on the role of the institution, efforts to increase production, and the investment environment.

Andrés Donoso Fabara
BIOGRAPHY
Andrés Donoso Fabara studied Law at the Pontificia Universidad Católica del Ecuador and has a wealth of experience in the public and private oil and gas sectors. He is currently the Secretary of the Secretariat of Hydrocarbons of Ecuador (SHE). Previous positions have included Legal Director and Executive Vice-President of Dispetrol, Head of the Legal Department at Petroamazonas, and Coordinator General Counsel and Ministerial Advisor at the Ministry of Non-renewable Natural Resources. He also participated in the oil contract renegotiation process in 2010-2011, and in mining contracts and other large-scale projects for the development of mature fields in 2011-2012. Additionally, he is a Trustee and Director of Foundation for a Life, a non-profit organization helping children with leukemia.

What is the main contribution that the Hydrocarbons Secretariat of Ecuador (SHE) makes to the country?

Since 2010, the Hydrocarbons Secretariat has been responsible for administering the country's assets, including the contracts and areas covered by our state-owned company, Petroamazonas. We encourage investment by oil operators, whether they are NOCs or IOCs. We identify potential contracts with new contractors, promote investment, and control those investments in light of the contracts signed. We are also the counterpart of any investor or contractor for the state.

What approach is needed for success in exploiting Ecuador's natural reserves?

Exploitation of our reserves requires short-, medium-, and long-term thinking. We estimate that the country will experience a decline in production, and believe that the development of the southeastern region is the key project for long-term oil production. For that reason, we established a related strategy in 2011. Accordingly, we are building a strategy of 21 blocks, 13 of which will be listed as part of a historic bidding process.

Will this new round increase production in Ecuador?

We have been producing for more than 40 years in the north and central area of the Amazon. The area that we are currently priming for development is almost identical in size. We believe that the fields in the southeastern region could be as lucrative as those we have in the north and in Peru, which would double our production. In the first round of studies, we discovered that about 1.6 billion barrels could be added to form a combined total of 1.8 billion barrels of proven reserves.

What does Ecuador need to do in order to maximize its oil and gas potential?

In the short term, we have to focus on the production fields and work on how we can help Petroamazonas and other new ventures to increase production at mature fields. In the mid term, investments in technology, new technical procedures, better warehousing, and the potential for more oil, would be helpful. However, in the long term our reserves will not yield new production, and it is important to focus on exploration in the southeastern region.

What is the main challenge in the hydrocarbons sector?

For exploration, contracts are normally production sharing deals or concession funds. The main challenge then, is that we are for first time ever, presenting a unique service contract for a pure exploratory region with a tariff system. The challenge is to understand the system and assign the appropriate technicians. We trust in the geology of the region, which is probably one of our strengths. One out of every three projects in exploration is successful, and operational costs are low. Naturally, despite our strengths the contract is a challenge as it is difficult to reopen an investment after 25 years.

How do you maintain relations with local communities in the country?

When we devised the strategy for oil development in Ecuador's southeastern region, we identified two main tasks: communicating with communities, and extracting oil. It is the constitutional right of every community to be informed before a decision is taken by the state that could impact the environment. We hired and around 50 people from local communities as local communicators. Our “social environmental diagnosis" tool explained the need to utilize out natural resources to improve living standards in Ecuador, and also our policy for oil development in the area. The results were amazing, and we signed agreements with most people in the area.

What can foreign investors coming to Ecuador expect from SHE?

We present ourselves as partners and help them understand the system and the law, our geology, our economics, and our legal issues to enable informed investment decisions. We want investors that we share a common vision with; a vision of sustainable economic development.