Ecuador to invest $ 6 bn in refinery projects in next 5 years

Dec 22, 2006 01:00 AM

Ecuadorean state-run oil firm PetroEcuador expects to spend $ 6 bn in the next five years to build a new refinery and improve three others, a top company official said.
Revenues from oilfields that once belonged to US-based Occidental Petroleum would finance the projects, said Diego Tapia, vice president of Petroindustrial, the unit of PetroEcuador that operates the refineries.

PetroEcuador would spend about $ 4.5 bn to build the new refinery, which would process 220,000 barrels of heavy 18 API crude oil a day, he said. About $ 1.5 bn would go to three existing state refineries to upgrade processing facilities. The improvement projects will be awarded next year, Tapia added.
The goal is to cut Ecuador's reliance on diesel imports by 75 % and meet local demand for gasoline and liquefied petroleum gas, Tapia said.

Ecuador spends most of its oil-export profits to pay for petroleum derivatives, including gas used in homes. Officials estimate the cost of importing derivatives will reach $ 2.3 bn this year, with an increase of 5 % for next year.
Meanwhile, between January and November, sales of crude oil and derivatives such as fuel oil generated $ 4 bn for PetroEcuador.

Fuels are subsidized in Ecuador. A cylinder of gas is sold to homes for $ 1.16, while it costs PetroEcuador $ 9.91; a gallon of diesel is sold for $ 0.90, but it costs $ 2; and a gallon of gasoline is marketed at $ 1.31, but it costs $ 1.91.
Occidental's former oilfields have generated $ 930 mm between May -- when they were seized -- and November. Next year, officials estimate they will generate $ 1.5 bn.

By law, money from the fields has to be put in a specific fund and spent only on oil- and electricity-related projects, as well as financing the fields' operations.
Ecuador ended Occidental's contract and seized the company's assets in May, alleging that the firm broke contract terms. The oil firm estimated its assets in Ecuador reached $ 1 bn.

Source: Dow Jones Newswires
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