Feb. 1, 2015

HE Pedro Merizalde Pavón


HE Pedro Merizalde Pavón

Minister of Non-Renewable Natural Resources, Ecuador


Prior to his current role as Minister of Non-Renewable Natural Resources, Pedro Merizalde Pavón, worked as General Manager of Refinería del Pacífico Eloy Alfaro RDP-CEM. His educational background is in energy and management, having studied Petroleum Engineering at the Universidad Central in Quito, and later completing an MBA at the Escuela Politécnia del Ejército. He has extensive expertise in the management of engineering and construction projects.

What role can the Ministry play in the transformation of the production matrix in Ecuador?

We have many opportunities to play a key role; for example, the generation of electricity with natural gas. Ecuador has reserves of up to 60 million cubic feet of natural gas. Natural gas is also expected to play a key role in boosting the development of the local pottery industry, which is internationally competitive. The Ecuadorean government is also developing the Pacific Refinery, an infrastructure project set to drive growth in the petrochemical sector. These two segments, along with oil and mining are our main contribution to the transformation of the productive matrix. The main focus of our Ministry and the government will be in the generation of electric energy and the refinery project.

What is the importance of the Pacific Refinery project for the country?

The Pacific Refinery will help to meet domestic demand for oil and diesel products in Ecuador. At the moment, we import about 40% of these products. The refinery will enable us to produce these products, reduce our imports, and use our resources more efficiently. The refinery also means that $5 trillion of natural resources will stay in our country, while increasing the export profile of Ecuador, which will make us a leading regional exporter. This project sets Ecuador on the path to energy independence. We have located and cleared the area and began building key infrastructure projects related to the refinery. The aqueduct, which will provide the refinery with water, will be completed in late 2014, and the design of equipment to be installed is also completed.

What is the potential of Ecuador to develop a competitive petrochemical industry as a result of the refinery project?

The development of a vibrant petrochemical sector is the main objective of the Pacific Refinery project, and we will progressively add products to our portfolio as we expand. We are able to offer and provide foreign investors with raw materials for the manufacture of their products, industrial facilities for operations, fiscal and legal incentives, and basic services.

How can the restructuring of Petroamazonas and Petroecuador increase the competitive level and efficiency of those two companies?

Petroamazonas and Petroecuador were restructured to be more efficient, as the two were involved in similar activities. Now, exploration and production is handled exclusively by Petroamazonas. This decision has already created positive results. For example, in early 2013, we produced an average of 505,000 barrels per day (bbl/d). In late 2013, production had increased to an average of 550,000 bbl/d. This growth is the result of the introduction of new technologies by Petroamazonas and increased investment in its workforce. Meanwhile, Petroecuador now manages refineries, transportation, distribution, and marketing. This restructuring has allowed the two companies to specialize, and has strengthened its business profile and efficiency.

What are the challenges facing the oil and gas industry in terms of the supply of highly qualified human resources?

The development of human resources is a high priority for the sector. We have established strategic partnerships with leading universities to build bridges between industry and higher education in the preparation and training of future technical workers for our country. We estimate that when the Pacific Refinery is fully operational, it will employ more than 22,000 people at its facilities, which means we will need many more skilled workers in Ecuador. We have also conducted research with international experts to predict future developments in the petrochemical sector, allowing us to properly develop and train our workforce for the future.

What are some of the main measures implemented by the Ministry to protect the environment in some of the most controversial projects?

We conduct exploration and production in line with international environmental standards. We also collaborate with international experts to reduce the environmental impact even further. For example, we give priority to the construction of underground pipes and secure platforms. All infrastructure projects are also built according to the standards set by the Ministry of Environment. When it comes to the construction of offshore platforms, we build according to strict international requirements. We also use very strict processes for disposal and recycling, which removes all contaminated elements from the production centers to areas where they are treated and safely recycled. Finally, we also seek technical advice from biologists, zoologists, and other specialists in flora and fauna, in order to protect ecosystems around the areas in which we produce.

What are some of the main advantages of Ecuador's barrel system tariff for investors?

We have a very attractive investment structure where the government recognizes the return on investment made by the companies, plus interest, and the costs of operation. This has generated a lot of interest from overseas, and we have a waiting list that includes companies from around the world. We provide these incentives in the context of a stable business environment, and the strengthening of our political and legal framework. Ecuador has areas of high development potential in the near future, and the arrival of even more international investors is expected.

In your opinion, do regulatory reforms adopted in 2013 in the mining industry in Ecuador make the industry attractive to investors?

We are still working on the full implementation of these amendments, but in the last couple of years we have built bridges with the private sector and the mining industry. At the moment, there are two Chinese companies operating in Ecuador, which have had a very active role in conducting research on the profitability and feasibility of developing large copper mining projects in Ecuador. We should note that large mining projects require long-term vision. Large investments are required, and the return is often realized only after 10 or 15 years. Mining is an attractive sector in Ecuador today, but there are some segments that require large investments that have adopted regulatory changes to ensure that the sector realizes its potential.

What are some of your main priorities as Minister for the next few years?

One of my priorities is to promote exploration in southeastern Ecuador, and to better identify the resources available there, especially hydrocarbons. We must also continue to develop existing mining projects and boost exploration activities along the Andes. While countries like Chile, Peru, and Colombia have active copper mines, Ecuador does not have them. The same applies to the gold mining industry. These are all areas that require greater investment. We plan to conduct research along the Andes to establish the true potential of the area, and we will use this data to attract foreign investors to Ecuador, a country that enjoys political and economic stability, and where a legal framework has been established.