Trans-Ecuadorian Oil Pipeline System (SOTE), Ecuador

The government of Ecuador is planning to build a new heavy crude pipeline to alleviate the country's current problems in crude transportation. This lagging transportation capability (already operating at full or near capacity) has been impacting the further development of Ecuador's petroleum industry. It has been estimated that up to 100,000 barrels/day of potential production is shut-in because there is no way to export it. It has been argued that the country's main export line the Trans-Ecuadorian Oil Pipeline System (SOTE) has been on the verge of collapse for some time. Petroecuador (the state oil company) has not invested in maintenance for some time and the line's pumping stations have been in danger of breaking down.

NEW HEAVY CRUDE PIPELINE

In order to resolve this problem, the Ecuadorian government has been working with private oil companies to build a new heavy crude pipeline. This long-planned project began in late 1999. Five private companies active in Ecuador signed letters of understanding to build and operate the pipeline to carry heavy crude from the Amazon region to the port of Balao: U.S. based Occidental, Arco, and Oryx; Spain's Repsol-YPF; and Canada's Pacalta.

Construction of the pipeline is expected to take an estimated 18-20 months and cost about $400 million. The pipeline is to have an initial capacity of more than 100,000 barrels/day, expandable to more than 300,000 barrels/day, for heavy crude between 16" and 22" API gravity. The line is to run parallel to the existing Trans-Ecuadorian pipeline. It has been estimated that when completed, the new pipeline could prompt up to $2.3 billion in additional foreign investments in oil production, and pave the way to more than double oil production by 2003.

The development of a new pipeline is expected to enable the government to proceed with additional exploration tenders, easing oil producers' concerns in assuring them that transport capacity will be available if new discoveries are found.

UPGRADE TO EXISTING PIPELINE

A separate project is also underway to upgrade existing pipelines. The SOTE pipeline, Ecuador's largest, currently transports some 349,000 barrels/day of crude oil from the Amazon Basin to the Pacific port / refining facilities at Esmeraldas. Petroecuador plans to increase output by another 300,000 barrels/day within a few years and to 350,000 barrels/day by 2003 or 2004. Production volumes would eventually be pushed up even further. It is seeking private partners to finance the project and to provide technology. The investment is estimated at $280 million and work should last 18-20 months. Upon completion, a fee will be charged, set by Petroecuador, for those firms wishing to transport crude through the pipeline.

PIPELINE EXPANSION

In addition to this major upgrade, Petroecuador signed a deal with Arco in January 1999 to expand the pipeline by 60,000 barrels/day through the addition of looping and compression at a cost of $33.5 million. Work was completed in October 1999. Previously the pipeline had most recently been upgraded in July 1998 when Argentina's YPF oil company added a series of new pumping stations on the line to increase flow.

Ecuador uses Colombian shipping ports on the Pacific to export an estimated 50,000 barrels/day of its Amazon-produced products. The Trans-Andean pipeline pumps oil from Ecuador's Amazon Basin to Colombia's pacific port of Tumaco. A joint $78.5 million project between Petroecuador and Colombia's Ecopetrol is being considered to increase the Trans-Andean Pipeline's capacity from 60,000 barrels/day to 85,000 barrels/day.

Click here for printable version