Spotlight: Ecuador's Pacífico refinery project, revisited

"The lack of organizational capacity and alignment of vision of the partners caused the failure of the project, along with wrong decisions."

So reads the 2018 annual report from Ecuador's energy and non-renewable natural resources ministry in reference to the multi-billion dollar 300,000b/d Refinería del Pacífico (RDP) refinery project, envisioned under a strategic alliance between state oil company Petroecuador and Venezuelan counterpart PDVSA and agreed to in 2007.

RDP was one of several hydrocarbon projects that President Lenín Moreno investigated for alleged mismanagement when his administration took office in 2017 from Rafael Correa.

An evaluation carried out by RSP Energy for the government revealed cost overruns in the US$1.53bn that had been spent since 2008, of which 44% went to early works and the balance to studies, engineering, licenses, operating expenses and taxes.

RSP concluded that the level that had been reached at phase three (definition) of front-end loading, also referred to as pre-project planning, did not support a final investment decision, and that no evidence was found regarding financial agreements and capital investment criteria.

In addition, the consultancy firm determined that existing assets (the early works) lacked a minimum level of maintenance.

"The vision and objectives of the owners did not align from the beginning. PDVSA was motivated in finding market for its crude, while Petroecuador sought to eliminate dependence on imported fuels," according to RSP, who argued that PDVSA had undue control of key decisions.

Following these findings, authorities said that RDP – renamed Refinería de Manabí – would only be completed if there was investor interest, and that a phased-in approach would be taken to reduce the hefty price tag, which was put at over US$13bn.

In 2016, BNamericas had already posed the question of whether the project would become a white elephant for Ecuador.

LATEST DEVELOPMENT

This week, Petroecuador announced that the process to liquidate special purpose company Refinería del Pacífico RDP Eloy Alfaro had begun.

Alberto Merizalde was designated for the process which includes a call for creditors to present documents within 60 days to justify their claims.

Pictured: The RDP project site (CREDIT: Petroecuador)