Mar. 15, 2020

Fernando Larrea


Fernando Larrea

General Manager, Flota Petrolera Ecuatoriana (FLOPEC)

Flexibility and internationalization have ensured that well over half of FLOPEC’s profits hail from abroad, making it more resilient and better experienced than many domestic players.

Ecuador's oil sector is being marked by the arrival of newcomers, not to mention plans to expand production. How do you fit into this?

FLOPEC's vision is aligned with the country's hydrocarbon policy. We were created as a public company to ensure the maritime shipping of exports and imports of petroleum products goes smoothly. Ecuador has left OPEC as part of its expansion policy, which is important for us because there are plans to export more barrels now. This is because more production is expected due to the promotion of private investment and new rounds. Thanks to our commercial agreements and strategic alliances, we transported 90% of Ecuador's exports of crude in ships controlled by FLOPEC in 2019. Additionally, since 2006, FLOPEC has undergone an internationalization process. As a tanker shipping company, we saw the need to have a better triangulation of the cargo, namely the better occupation of ships. In this way, we not only go from Ecuador to the point of destination of Ecuadorian barrels and come back to local ports; our ships load in any other crude oil loading port. We can load Colombian or Mexican crude, too. As a result, there are times when ships do not return to Ecuador for more than two years. All this has greatly internationalized our operations. We are part of international pools and commercial agreements with other ship owners, including some of the 10 largest in the world. Some 60% of our income comes from abroad, while 40% corresponds to Ecuadorian business.

How is the increasing amount of Colombian oil being exported through Ecuador affecting your operations?

There are certain agreements between the Colombian and Ecuadorian governments that provide for the transportation of Colombian crude through Ecuador. In addition, the Heavy Crude Oil Pipeline is already transporting Colombian crude, and there are negotiations to increase the number of barrels of Colombian oil shipped from Ecuadorian ports. At the moment, Colombian Chaza crude makes up 2% of Ecuador's total oil exports. This creates more volume and business for our company.

What new or existing markets will Ecuador seek to sell its extra capacity to?

Most would go to countries where it is already present. Historically, most Latin American countries are deficient. In Peru and Chile, there is always demand for Ecuadorian oil, usually between 10% and 15%, although sometimes it goes up to 17%. The US takes 35-37% of Ecuadorian crude because its refineries need heavy crude. The oil it produces is very light, and most of the previous investments in refineries cannot process it in the best way. Demand will continue in the US, as that country tends to export its oil to new refineries with higher levels of refining or conversion, as in Asia. That market will use light crude that can be more profitable. Currently, we have access to a fleet of 59 ships through all our associations and agreements. All our partners are aware that our priority is to cover the Ecuadorian export program. Once this is assured we can look for other cargoes in other international loading areas.

What are the priorities for FLOPEC in 2020?

Since 2010, we have delivered close to USD400 million to the state, which is our sole shareholder—both in liquidity and in surpluses and infrastructure with the building of the LPG terminal in Monteverde. In that respect, our priorities are to keep increasing our national and international market share in the most profitable manner and continue taking advantage of our associations and commercial agreements to generate greater resources for the Ecuadorian state. As a state company, we also look after the wellbeing of the people who live in the areas where we operate (Esmeraldas, La Libertad), where we focus heavily on the full development of children and young people, whether through education, health, or labor programs.