Argus Media Limited

10/20/2021 | News release | Distributed by Public on 10/20/2021 14:44

New Stratus Energy eyes Repsol’s Ecuador blocks

Canadian independent New Stratus Energy is looking to acquire Spanish Repsol's 35pc operating stakes in two heavy oil blocks in Ecuador, but with a proposed change in contract terms.

New Stratus Energy is seeking to invest $200mn to drill 30 wells on blocks 16 and 67 in 2022-23 to boost production up to 25,000 b/d, with an extension of the existing contract for at least 15 years. The two blocks located in Orellana province currently produce a total of around 15,000 b/d of 15°API crude.

New Stratus Energy chief executive José Francisco Arata, a Venezuelan geologist who formerly headed Colombia-focused Pacific E&P now known as Frontera, told Argus the company wants to change the existing service contracts for the blocks to production-sharing deals.

Chinese state-owned firms Sinochem and Sinopec have a combined 34pc in the two blocks, and Taiwan's state-owned CPC has the remaining 31pc.

The current contracts for the two blocks expire in December 2022. For block 16, the government is supposed to pay a fee of $38/bl for production, and $29/bl for block 67. But the government is behind on the payments, with an accumulated $120mn in debt, according to Arata.

Neither the ministry nor Repsol responded to requests for comment.

"By investing $200mn in 2022 and 2023, oil reserves would increase up to 114mn bl, only applying primary recovery techniques. This would represent $1.8bn in additional income for Ecuador over the next 15 years, without any financial risk for the country," Arata said.

If the contracts are not extended and not changed to PSCs, Arata said the company would spend just $15mn, including costs to relinquish the acreage back to the state and to pay labor severance.

Ecuador's energy minister Juan Carlos Bermeo said the ministry is evaluating New Stratus Energy's acquisition request. Under Ecuador's hydrocarbons law, the ministry must authorize such transfers.

If the debt issue can be resolved, President Guillermo Lasso's administration seems likely to approve the deal, which aligns with its campaign to expand private investment and increase oil production, which has been stagnant at around 460,000-480,000 b/d.

Founded in 2018, New Stratus Energy has operations in Colombia and Peru. Among the company's independent board members is Venezuela's former oil minister and former Venezuelan state-owned PdV chief executive Humberto Calderón Berti.

Frontera and Gran Tierra are two other Canadian independents focused on Colombia that have ]entered Ecuador's upstream]( in recent years.

By Alberto Araujo