With transportation of the supply of crude oil being a problem, in 1997 the government of Ecuador made plans to build a new heavy crude pipeline.
The lagging transportation capability (already operating at full or near capacity) had been impacting the further development of Ecuador's petroleum industry. It was estimated that up to 100,000bpd of potential production was shut-in because there was no way to export it or transport it to the refinery.
"In 1997 the government of Ecuador made plans to build a new heavy crude pipeline – SOTE."
Ecuador is only a marginal producer with 600,000bpd but oil is a major revenue source. The majority of production was taken over by the state oil company Petroecuador in the late 1970s. The country's first refinery was built at Esmeralda on the Pacific coast, and the trans-Ecuador oil pipeline system (Sistema Oleducto Trans-Ecuatoriano, SOTE) was constructed between Lago Agrio and the Balao oil terminal to transport high-value light crude oil (29° to 30° API) a distance of 503km (310 miles) from the oilfields of the East.
It was argued in the late 1990s that the trans-Ecuadorian oil pipeline system had been on the verge of collapse due to neglect for some time. Petroecuador (the state oil company) had not invested in maintenance for some time and the line's pumping stations were in danger of breaking down. Investment was required to improve oil transport and allow the country to make the most of its oil assets.
NEW HEAVY CRUDE PIPELINE
In order to resolve this problem, the Ecuadorian government worked with private oil companies to build a new 300-mile 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: US based Occidental, Arco, and Oryx; Spain's Repsol-YPF; and Canada's Pacalta. Oleoducto Crudos Pesados is the company responsible for the management and operation of the pipeline.
Construction of the pipeline was expected to take an estimated 18 to 20 months and cost about $400m (came onstream in September 2003).
The pipeline had an initial capacity of more than 100,000bpd, which was quickly expanded to more than 450,000bpd, for heavy crude between 16° and 22° API gravity. The line runs parallel to the existing trans-Ecuadorian pipeline for much of the length and will stay in the hands of the constructing companies for 20 years.
The new pipeline has promoted additional foreign investments in oil production, and has paved the way to double the country's oil production. The SOTE is used by Petroecuador and the new OCP is used by foreign oil companies for crude transport.
The development of a new pipeline has enabled 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 TRANS-EQUADORIAN PIPELINE
A separate project was also undertaken to upgrade and refurbish the existing SOTE pipeline, from its commissioned capacity of 349,000bpd of crude oil to a further 300,000bpd.
"The trans-Ecuador oil pipeline system was constructed to transport high-value light crude oil."
The pipeline has had several major mishaps to prevent its use such as the earth quake of 1987, which cut oil exports by 50% and the 2004 landslip which completely stopped oil exports leading to a force majeure declaration. Fortunately these problems have now been overcome and the SOTE has been upgraded to a good condition (thanks to an investment of over $280m and technology from foreign companies).
In addition to this major upgrade, Petroecuador signed a deal with Arco in January 1999 to expand the pipeline by 60,000bpd through the addition of looping and compression at a cost of $33.5m. Work was completed in October 1999. Previously the pipeline had been upgraded in July 1998 when Argentina's YPF oil company added a series of new pumping stations on the line to increase the flow.
Ecuador also uses Colombian shipping ports on the Pacific to export an estimated 50,000bpd 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 $78.5m project between Petroecuador and Colombia's Ecopetrol is being considered to increase the trans-Andean pipeline's capacity from 60,000bpd to 85,000bpd.