Recently published research from Business Monitor International, "Ecuador Oil & Gas Report Q3 2013", is now available at Fast Market Research

Boston, MA -- (SBWire) -- 07/24/2013 --President Rafael Correa's recent re-election will weigh on the energy sector over the next four years, as he uses oil revenue to finance his social spending-heavy political agenda. Our forecasts suggest that Ecuador's oil production will peak in 2015 and 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 and gas sector are:

- President Rafael Correa's recent re-election will weigh on the energy sector over the next four years, as he uses oil revenue to finance his heavy social spending political agenda.
- Our forecasts suggest that proven gas reserves will begin to decline after 2014. As for gas production, we expect an uptick in output 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 a significant reduction in total net oil exports, which includes both crude oil and refined products. An average yearly decline of 2.9% between 2013 and 2017 is expected.
- The Hydrocarbons Secretariat of Ecuador (SHE) is currently holding an oil exploration licensing round, which was first announced in November 2012. The round has on offer 13 new oil blocks for exploration in the relatively underexplored south east, near the border with Peru. A road show was held in the first three months of 2013, and the official bidding process is scheduled to begin in March. According to assessments made during the 1970s, the country's south-east region had preliminary estimates of more than 100mn barrels (bbl) of crude. However, the government hopes that, due to recent technological advances, its real potential could be between 800mn and 1.6bn barrels (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. This round will be a key test for the country's energy sector, as it will be the first licensing round held since the government changed the country's contract terms from production-sharing contracts (PSCs) to per barrel fees.
- 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 2008/2009 sovereign debt default, Ecuador also ranks among 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 particularly poor investment profiles.

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