OREANDA-NEWS. December 20, 2016. Ecuador expanded its portfolio of oil-backed debt this month with a total of \\$900mn in separate loans from Thailand's state-controlled PTT and Oman's state-owned Oman Trading International (OTI).

On 1 December, state-owned PetroEcuador signed a five-year \\$600mn oil-backed loan agreement with PTT Trading International, according to official documents seen by Argus.

On 6 December, PetroEcuador signed a separate \\$300mn 30-month maturity fuel oil-backed loan contract with OTI, apparently the first time Oman has signed such an arrangement in Latin America.

The Ecuadorean government "has agreed to refund to the purchasers any amounts of the prepayments and related surcharges for advance payment which are not otherwise satisfied through the delivery of crude oil or fuel oil, respectively, or refunded by PetroEcuador in accordance with the contracts," according to the documents.

The new credit instruments will help Quito adjust to sharply lower revenue since oil prices collapsed in 2014. The Opec country's oil export revenue fell by 51.2pc year on year to \\$6.3bn in 2015 and shrank by a further 25pc to \\$4.4bn in January-October 2016 from a year earlier, according to central bank figures. Ecuador is likely to experience another dent in its coffers in 2017 as a result of its participation in a recent Opec accord to cut production.

Up to now, most of Ecuador's oil-backed loans have come from China, which has similar arrangements with Venezuela and Brazil. In 2010-14, Ecuador signed three separate oil-backed agreements for a combined \\$5bn with China Development Bank (CDB). The contracts involve crude and fuel oil delivery to PetroChina and Unipec, a state-owned Sinopec subsidiary.

Ecuador was required to invest the \\$5bn in specific infrastructure projects inside the country. The first loan agreement, signed in 2010, totaling \\$1bn has already been repaid. The second \\$2bn agreement, signed in 2011, and the third \\$1bn loan, signed in 2012, each have an eight-year maturity.

"Deliveries under these contracts are based upon international spot prices, such as WTI plus or minus a spread, plus a premium paid due to the term of the contracts. The spread is calculated using Argus and the quality of crude oil as measured by the American Petroleum Institute", the documents associated with these CDB loans say.

Quito's debt to Beijing grew further this year. On April 29 2016, after a devastating earthquake, Ecuador signed a \\$2bn credit agreement with CDB, backed by a parallel crude sales agreement between PetroEcuador and PetroChina, a subsidiary of China's state-owned CNPC.

The loan was divided into two tranches, the first \\$1.5bn has an eight-year maturity with a two-year grace period and a 7.25pc interest rate. A second \\$500mn yuan-denominated tranche tied to specific capital projects has an eight-year maturity with a two-year grace period and a 6.8pc interest rate.

On 22 January 2016, Quito landed a multi-party \\$970mn credit agreement involving crude delivery to PetroChina. The loan was granted by a consortium of Chinese banks led by Industrial and Commercial Bank of China, EximBank, and Minsheng Banking.

The first \\$820mn tranche was disbursed in February 2016. The five-year credit has an interest rate of three-month Libor plus 6.2pc.

Ecuador started diversifying the oil-backed debt portfolio in September 2014, when PetroEcuador secured a \\$1bn credit from trading company Noble Americas. Under the contract the trader agreed to supply up to 50pc of PetroEcuador?s imports of gasoline and diesel for five years. The loan has a 5.63pc plus three-month Libor interest rate.

In July 2015, PetroEcuador signed its first \\$2.5bn oil-backed loan agreement with PTT to help finance its investment program. Under the contract, PetroEcuador committed to deliver 116.6mn bl of Oriente and Napo crude grades over an undisclosed period of time.

Each barrel was to be sold to PTT with a \\$0.45/bl premium under a free placement contract. PetroEcuador did not disclose the price formula.