Ecuador mulls $40/bl oil price for 2016 budget

OREANDA-NEWS. September 23, 2015. Ecuador finance ministry is considering an oil price assumption of \\$40/bl in next year?s budget, pointing to deepening cuts in oil revenue for Opec?s smallest member state.

Already this year, Ecuador's oil export revenues could be \\$7bn lower than expected if crude prices do not recover, and the economy could contract, President Rafael Correa has warned.

Ecuador's central bank had initially forecast economic growth this year of 4.1pc, with an average crude export price of \\$79.70/bl for Ecuador's Napo and Oriente grades. But in June it lowered the forecast to 1.9pc, with an average crude export price of \\$42.01/bl and projected output of 554,600 b/d.

The finance ministry last month indicated another \\$800mn reduction in the country's \\$34.9bn budget for 2015. Spending had already been slashed by \\$1.4bn at the start of the year.

State-owned upstream firm PetroAmazonas' capital expenditures this year have been cut to \\$2.2bn, from \\$3.4bn in 2014. State-owned downstream company PetroEcuador's capital expenditures shrank to \\$625mn, from \\$758mn last year.

Foreign oil companies plan to invest \\$307mn this year in exploration and production in Ecuador, down from \\$500mn in 2014.

With falling investment, Ecuador's crude production dropped by 3.67pc to 537,800 b/d in July compared to the same period a year earlier, and by 0.60pc from the previous month. Oil export revenues plunged by 50pc year-on-year to \\$606.4mn. The average price for Ecuador's Oriente and Napo grades plummeted to \\$41/bl, compared with \\$86/bl in July 2014, according to the central bank.

Ecuador has reduced its 2015 crude production target to 550,000 b/d from 560,000 b/d, as PetroAmazonas closes its costliest wells.