When contracts for the operation of two oil production blocks expire on December 31, Ecuador’s $290 million debt to a subsidiary of Canada’s New Stratus Energy (NSE.V) will be cancelled, the government and subsidiary announced on Thursday.
After President Guillermo Lasso refused to enter into negotiations to extend the contracts and modify their terms, the subsidiary, Petrolia Ecuador, is required to hand back blocks 16 and 67 in the Amazonian region of Orellana.
Invoking a breach of contract by Ecuador by refusing to engage in direct dialogue, New Stratus has declared it will turn to international arbitration.
According to unpaid tariffs, the state owed the contractor $290 million, according to a statement from the energy ministry. “That debt is eliminated at the conclusion of the contract due to expiry.”
The government is required to pay the operating corporations a specific fee per barrel produced under service provision contracts like the one that is in place for Petrolia’s blocks, albeit the state may become indebted to them if oil prices fall below a particular level.
According to firm manager Ramiro Paez, Ecuador has paid Petrolia about $60 million in fees over the last two years. He acknowledged that the remaining $290 million in debt will be erased when the contracts expired.
He noted that because a mediation procedure must be finished before the corporation can present its arbitration case.
The handover is underway, according to Paez. “The majority of the workers we are paying off will be hired by Petroecuador. We are transferring the assets, materials, and equipment.”
The blocks, which collectively produce roughly 14,000 barrels per day, will be operated by the state oil company Petroecuador beginning on January 1.
According to the ministry, the blocks would soon be given to a new private operator through an international bidding process. The ministry also predicted that the blocks would generate $150 million in yearly revenue based on an estimate of an oil price of $64.8 per barrel in 2023.
