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The ITT block (block 43) project and block 31 PDF Print E-mail

While there are already oil operations that affect Yasuní National Park, the ITT field and Block 31 are in the very heart of the park. An environmental hearing on the status of the park is underway, and will result in proposals for the integral recovery of this important natural reserve.

The ITT project is tied to Block 31, as they share numerous characteristics in terms of operations. Both blocks are located within Yasuní National Park and form the park’s undestroyed frontier.

In both cases, the oil reserves comprise highly viscous heavy crude oil with an API gravity of between 14 and 15 degrees. It is expected that in both blocks, the water-oil ratio will be similar to that found in Block 16, where every 10 barrels of oil are accompanied by 90 barrels of produced water, on average. This would mean a huge amount of waste that would be spilled into the surrounding environment.

Map of aggression and resistance in the ITT block


Although the press has insistently reported figures of reserves of 960 million barrels, according to Petroecuador data the actual proven reserves (1P) -meaning the amount of oil “in situ” that can almost certainly be commercially produced - total 412 million barrels. When the proven and probable (2P) reserves are combined, the figure rises to 920 million barrels, while the proven and probable and possible reserves (3P) total 1,531 billion barrels. The actual amount could obviously only be confirmed through a prior exploration period.


Field


1P


2P


3P


Ishpingo South/North

Tambococha – Tiputini

Oil in situ


2,614

1,913

4,527

3,235

2,351

5,586


3,729

2,679

6,408



Reserves



412



920



1,531


According to an environmental impact study presented by Petrobras for Block 31, crude oil production would peak at 30,000 barrels a day, but in 18 years it would rapidly decline to 3,000 barrels a day, as illustrated in the following graph.

With regard to the ITT Project, according to Petroecuador, oil production would stabilize at 108,000 barrels a day during the first 17 years and eventually drop to 58,000 barrels at the end of 29 years.

For the two projects combined, total production would begin with 20,000 barrels daily, reach a peak of 122,000 barrels daily in the fifth year, and decline to 59,000 barrels after 29 years, as illustrated in the following consolidated graph.

Petroecuador and Sinopec proposals for the ITT project

A comparison of the two proposals sheds light on a number of significant points:

  1. The Sinopec proposal is similar to the Petrobras proposal in that it involves joint operations.

  2. Both companies propose additional seismic testing to confirm the total volume of reserves. Sinopec, which states that it is working with Petroecuador data, plans to undertake a 450 km² high-intensity 3D seismic survey of the field.

  3. Crude oil production is estimated at 160,000 barrels a day as of the fifth year in the case of Sinopec, and at 100,000 barrels in the case of Petroecuador, during a period of 13 years, after which production would decline.

  4. Sinopec proposes the drilling of 214 wells, while Petroecuador proposes 130.

  5. In terms of investment, Sinopec has stated that if it receives authorization, it would invest a maximum of five billion dollars, but the actual amount has not been established. It also refers to advanced extraction in the third year.

  6. Sinopec has also spoken of early production. This does not imply that state revenues will arrive sooner than expected, but rather that this mechanism will be used to finance Sinopec’s own investment, which means its actual investment in the country will be smaller.

The proposals that Petroecuador has presented have numerous aspects in common, but they all suggest environmental problems in particular, in terms of the management and disposal of waste products, the excessive optimism regarding the volume of reserves, and incomplete knowledge of the environmental impacts and technology to be used. Judging by the estimates of extraction costs, the technologies utilized will be similar to those that have given rise to the environmental crisis in the areas of Ecuador where the oil industry is already active.

The information provided by Petroecuador refers to an estimated investment of 2.09 dollars per barrel and an extraction cost of 3.41 dollars per barrel, even when the current average extraction cost is over 10 dollars a barrel for heavy crude operations.

Petroecuador has analyzed the following three scenarios for the ITT project:


CONDITION: EQUAL

SHARES AND IRR


Joint venture


Other contract modalities


Petroecuador

operation


Internal rate of return

State share

Petroecuador share

23.6%

NA

50%


23.6%

50%

NA


52.9%


100%


RESULTS:


USD billion

USD billion


USD billion


Labour share

Law 10

Income tax

State share

Petroecuador profit

% of net profit


4.210

413

5.963

NA

3.910

10.070


1.733

413

2.455

16.509

NA

0

NA




28.476


STATE REVENUES


20.356

19.377

28.476

The revenue figures are not credible, given the numerous and serious doubts over the technology to be implemented, the real investments to be made, the volume of crude oil that will be obtained, and also the real figures related to costs, expenditure, amortization and income tax.

The proposal presented by Sinopec, for example, refers to the generation of 320 MW of electricity with the residue extracted from the oil, the improvement of the crude oil quality to 26 degrees API gravity and its transportation through the Trans-Ecuador Pipeline System (SOTE).

At the same time, however, it refers to the Jaramijó petrochemical complex that would process the heavy crude, which makes it difficult to understand the purpose of a plant for improving the crude, nor would it make sense to generate electricity with the objective of improving the quality of the crude.