Ecuador expects to sign deal in August on $2 bil loan for new refinery

Quito, Ecuador (Platts)--4 Jun 2014 833 pm EDT/033 GMT

Ecuador expects to sign a deal with the Chinese government for $2 billion to help finance a delayed 200,000 b/d refinery construction project on the South American OPEC country's Pacific Coast, the minister for strategic sectors said Wednesday.

Some $500 million of this will be freely usable by the administration, Rafael Poveda added during a meeting between President Rafael Correa and foreign reporters.

The total Ecuador will need to borrow to complete the 6-year-old project will be $9 billion, with another $7 billion to be provided in a separate loan by the Industrial and Commercial Bank of China by the end of September, he said.

It originally estimated that the plant, including a petrochemical complex, would have a 300,000 b/d capacity, a third more, and cost $12.5 billion. The entry of China National Petroleum Corp. as a shareholder in the project, as announced last year, will help to underpin the viability of the loans. CNPC previously announced that it would provide capital to take a 30% stake in the refinery project.

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Ecuador currently produces around 550,000 b/d of crude.

Under terms of the "master agreement" reached between the parties last year, Venezuela's state company PDVSA will see its share in the facility, known as Refineria del Pacifico Eloy Alfaro, drop to 19% from 49% currently, while Ecuador's Petroecuador will continue with its 51% majority.

Ecuador and CNPC signed a framework agreement on the refinery project plus upstream development projects a year ago. CNPC did not at that time say what its share in the refinery would be, noting that "further negotiations will be carried out on the basis of the agreement, and the cooperation contract is expected to be signed within the year."

Ecuador has been seeking Chinese funding for the project since early 2012, given a lack of funding from its Venezuelan partner. CNPC and the ICBC signed a letter of intent for participation in the project in February 2012.

Correa's populist government wants the refinery to go online by 2017. Originally planned to provide Ecuador with the capacity to export refined fuels from 2013, five years after the first stone was laid, delays with the funding have led the project to be downsized to 200,000 b/d. Some Ecuadorean energy analysts estimate that it may have to be reduced another 50% before it can be fully funded.

So far, detailed engineering for the refinery and basic engineering for a planned petrochemical plant have been completed, as well as leveling of the ground at its site near Manta. Petroecuador has spent some $900 million on the project so far, Poveda said during Correa's State of the Nation speech last May 24.

The Ecuadorean state company is also in the midst of a wholesale refurbishment at its main refinery at Esmeraldas, to return it to its 1976 capacity of 110,000 b/d. This will lead to full shutdowns during the second half of this year.

--Stephan Kueffner,
--Edited by Annie Siebert,

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