2024-04-30 08:44:49
Only 9% is allocated to the General State Budget, mostly to cover production expenses, fuel imports and other legal allocations.
By considering Ecuador as an oil country, it could lead to a simple deduction that most of the resources obtained from its extraction are used to pay the expenses of the General State Budget. However, this premise is no longer the case.
According to the data provided by the Ministry of Economy and Finance within the framework of the budget proforma for the year 2024, it is observed that oil revenues are mainly used to cover the costs of oil production and the supply of gasoline for refining.
The income represented by the production of 156 million barrels per year will be USD 14.34 billion. However, several expenses must be covered from this amount:
– Fuel imports: USD 6,575 million.
– Petroecuador production costs: USD 5,016 million.
– Payments to private oil companies: USD 1,186 million.
– Allocations to the Amazon: USD 301 million.
Expenses total USD 13,078 million and USD 1,262 million remain. In practical terms, of every USD 10 of oil revenue, only USD 0.80 contributes to the General State Budget.
Oil implies not only income and expenses, there is also a significant amount that is not received, around USD 3,093 million annually due to fuel subsidies.
The government has stated that this figure will be reduced this year by targeting subsidies, although no plan has been published in this regard.
This is the distribution of oil revenues, however, not all amounts are allocated as stipulated in the budget proforma. For example, there are certain pending payments to the Amazon Sustainable Development Fund corresponding to the period 2018-2023, which total USD 407.7 million, according to the latest accounting of the Ministry of Energy and Mines.
Oil extraction in Ecuador continues without showing signs of improvement and the number of barrels of crude oil produced daily continues to decrease. Despite the State’s efforts to increase the volume of production, various obstacles prevent this objective.
For this year, oil extraction in Ecuador is carried out in a total of 2,429 wells that are in 87 blocks, with the majority of them located in the Amazon region of the country.
The most productive oil fields are currently located in the province of Orellana. For example, in the Sacha Field 78,502 barrels are extracted daily, in the Auca Block 76,987 barrels, in the Shushufindi Field 73,344 barrels, in the ITT Block 53,044 barrels, and in the Edén Yuturi Field 30,559 barrels.
Despite efforts to increase production, figures provided by the Agency for the Regulation and Control of Energy and Non-Renewable Natural Resources show that national crude oil production in Ecuador shows no signs of significant growth.
In 2022, the daily average number of barrels was 493 thousand, while in 2023 a drop to 490 thousand barrels was recorded. So far this year, production has continued to decline, with an average extraction of 485 thousand barrels per day until March.
The lack of increase in the volume of crude oil extraction is attributed to the absence of a significant boost in domestic and foreign private investment, since international tenders have not been promoted effectively.
Furthermore, according to the Ministry of Hydrocarbons, there are 20 blocks that are not producing oil because they have not yet been concessioned. Last year, Petroecuador experienced instability in its administration, with the appointment of five managers in total, which is equivalent to a change of official approximately every two and a half months. This situation also affected the company’s ability to obtain new crude oil reserves.
The State faces the challenge of achieving production of at least 550 thousand barrels of oil per day by next year. However, this goal is hindered by the need to dismantle the ITT Block in Yasuní, which currently produces 53 thousand barrels per day, by August.
According to energy geopolitics consultant Nelson Baldeón, Ecuador faces an annual loss of USD 2.2 billion per year due to the lack of production of 100 thousand barrels of oil per day.