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Boston, MA -- (SBWire) -- 01/03/2013 --BMI View: Our forecasts suggest that the Ecuadorean oil production has now peaked and will begin a steady downward trend through the end of our forecast period. Similarly, natural gas production is forecast to peak in 2016, and decline through 2021. As such, the sector is in need of increased foreign investment, but its negative business environment leaves little room for optimism in the near future.

The key trends and developments in Ecuador's oil & gas sector are:

- Our forecasts suggest that proven oil reserves peaked in 2011 and proven gas reserves will begin to decline in 2014. Similarly, our forecasts also suggest that total oil production peaked in 2012 and will begin to decline at an average rate of 1.81% between 2013 and 2017. As for gas production, we expect an uptick in production through 2016, but then end the forecast period in decline as well.
- Oil exports remain a mainstay of the Ecuadorean economy, yet due to falling production, we forecast also calls for a significant reduction in net exports, with an average yearly decline of 15% between 2013 and 2017.
- The announced its latest oil exploration licensing round in October 2012 ,during which offered 13 new oil blocks near the border with Peru for exploration. According to assessments made during the 1970s, the country's south-east region, where the licensing round will occur, had preliminary estimates of more than 100mn barrels (bbl) of crude. However, the government hopes that, due to recent technological advances, the region's real potential could be between 800mn and 1.6bn bbl. Yet, even the top line estimates of the licensing area's potential are likely to be insufficient to reverse the sector's overall negative trend.
- Ecuador's poor business environment and its deterrent effect on foreign investment also weigh considerably on the country's energy sector outlook. In addition to its enduring exclusion from international capital markets following its 2009 sovereign debt default, Ecuador also ranks the lowest in Latin America in terms of upstream country risk dynamics in BMI's proprietary Risk/Rewards Ratings. Its ratings are largely on par with Argentina and Bolivia, two other countries with poor investment profiles.
- Underscoring the country's poor business environment, an Ecuadorean judge has determined that Chevron must pay US$19.02bn in environmental damages for the actions of Texaco in the country between 1964 and 1992. Chevron acquired Texaco in 2001. Included in this massive penalty is an US8.6bn fine because Chevron has, to date, refused to apologise for the spill. Chevron's appeal to the US Supreme Court to block the collection of this fine was blocked in October 2012, and a date for the trial set for October 15, 2013..

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