Exploration / Development
Petroecuador seeks to develop Block 20 heavy
oil
By OGJ editors
HOUSTON, Aug. 22
-- Luis Jaramillo, president of Ecuador's Petroecuador, said Ivanhoe
Energy Inc., Vancouver, BC, would begin work within 9 months towards
the production of heavy crude oil from Pungarayacu heavy oil field on
Block 20 in Ecuador's Oriente basin, according to El Comercio
newspaper.
Robert Friedland, Ivanhoe's executive chairman, president, and chief
executive officer, confirmed that the company is in advanced detailed
discussions with Petroecuador, but he claimed Aug. 19 that no final
agreement has been reached.
"A final agreement would require approvals by both parties,"
Friedland
said. "Disclosure of the terms of such an agreement would be made at an
appropriate time," he added.
Petroecuador's former Pres. Fernando Zurita earlier this year said
Pungarayacu reserves are 3-4 billion bbl of 8° gravity oil, and the
company hopes to produce 30,000-120,000 b/d from the field within 5
years.
Petrobank Energy & Resources Ltd. has evaluated the commercial
viability of developing the field, examining various alternatives for
the optimal exploitation strategy for the extensive heavy oil resource.
Ivanhoe has the technology to transform the heavy crude into a lighter,
23° gravity grade.
Ivanhoe, which recently purchased Athabasca oil sands assets from
Talisman Energy Inc. northeast of Fort McMurray in Alberta, also has
expertise in the US and China in upgrading heavy oil.
Important to Ecuador
Developing
the Pungarayacu reserves is important for Ecuador, which is South
America's fifth-largest oil producer as well as a member of the
Organization of Petroleum Exporting Countries. The country had a total
output of about 511,000 b/d in 2007, including production by
Petroecuador and private oil companies operating in the country.
However, Petroecuador's steady production decline led to the
resignation of the company's former president, Fernando Zurita in May,
when the company failed to achieve its production goal of 180,000 b/d
set by the nation's President Rafael Correa (OGJ Online, May 22, 2008).
Zurita blamed the falling production on internal problems.
From an average production of 175,303 b/d in December, 2007, the
state
company's output fell to 169,011 b/d by April, partly from natural
field declines. In February, flooding ruptured the 314-mile export
pipeline, forcing the country to meet its export obligations from
reserves in storage.
Earlier this year Ecuador's Mining and Oil Ministry reported that
the
company's 2008 oil production target had been cut to 172,000 b/d.
If the project to develop Pungarayacu is approved, the Canadian
company
plans to invest nearly $5 billion in the project, according to a
Bloomberg report, with Ecuador paying $37/bbl for the oil extracted.
According to project plans, the field will be evaluated and results
ratified, then production would begin at 30,000 b/d, rising gradually
to as much as 120,000 b/d. The contract will be for 20 years with
options for 10-year extensions.