Ecuador reaches deal with Repsol toward modified oil contract terms

Mar 13, 2009 01:00 AM

Repsol has reached an agreement with the government of Ecuador that will allow the establishment of a stable contractual framework within a year.
Through the agreement, the license to operate Block 16 has been extended by six years from 2012 to 2018, and a provisional one-year term has been established during which the Ecuadorian government will reduce taxes on extraordinary benefits from 99 % to 70 %. Over the next year, a long-term service contract will be negotiated to definitively regulate Repsol's activities in Ecuador.

This agreement, that represents for Repsol an investment commitment of an estimated $ 173,5 mm through 2018, is a positive development for the company since it means a step forward in the establishment by the Ecuadorian Government of a new regulatory scheme for Repsol's activities in that country until 2018. The extension of the concession implies an increase in the value of Repsol's assets and investments in the country.
As part of the agreement, Repsol will pay $ 244.6 mm in taxes as a member of the operating consortium. The payment won't negatively affect the company's accounts, as the amount was fully provisioned in 2008.

The consortium operating Ecuador's block 16 is made up of Repsol, its operator with a 55 % stake after the acquisition of Murphy Oil's share, OPIC of Taiwan (31 %) and Sinochem of China (14 %), producing a total of 48.000 bpd.
Repsol has always maintained an open dialogue with the Ecuadorian authorities, who have commended Repsol's responsible attitude towards extraction and its commitment to local communities and the environment in its operations in Block 16 in the Bogui and Capiron fields.

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