Ecuador Leaving OPEC Ready To More E&P Activity

Ecuador Leaving OPEC Ready To More E&P Activity

In October 1st Ecuador announced it was leaving the Organization of Petroleum Exporting Countries (OPEC) in January.

Ecuador is one of the smallest producers in the organization but by making this kind of moves it wants to boost its production in oil revenues. This comes at the same times the cartel is suffering from low prices.

It is also come after Qatar’s announcement to leave OPEC less than a year ago citing to focus on natural gas production.

“Ecuador is being honest about not being able to subject itself to further cuts,” said Schreiner Parker, vice president for Latin America at consultant Rystad Energy. The departure comes amid efforts by Ecuadorian President Lenin Moreno to reverse economic policies imposed by his predecessor. “Moreno wants to pursue his own policies and is more market-friendly than people originally thought,” said Parker.

Even though Ecuador is part of OPEC it is not mandatory for them to follow the guidance of OPEC. On numerous occasion Ecuador has been on the breach of its promised to the organization.

Ecuador has left OPEC previously in 1073 and suspended its membership until 1992 when Former President Rafael Carrera restarted its membership in 2007. Other countries have left and returned, including Gabon and Indonesia.

The exit sends a message to the oil industry that Ecuador is open for business in a region where Venezuela is hobbled by sanctions and economic collapse, Mexico has halted any new bid rounds, and political uncertainty is restraining investments in Argentina. Removing the risk of future OPEC-related constraints on production will make it easier to attract drillers and get financing.

“It sends a signal that at the moment their interest is in bringing in a lot of investment, and it may open up new markets. You have to figure all that was part of the decision making,” said John Padilla, managing director of IPD Latin America LLC. “Particularly given the vacuum created by the sanctions in Venezuela and the drop off in Mexican production, it’s an interesting marketing signal.”

Ecuador is currently developing a 1.6 Bbbl heavy crude oil field in part of the Yasuni National park Protests by indigenous and environmental organizations have stopped efforts to develop the oil industry in the southern half of its Amazon territories, which officials have pushed for opening to tenders as soon as 2020.