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Ecuador’s government has reached an agreement with Schlumberger to start repaying a debt accumulated over the last few years, according to a Reuters report. The government also said the oilfield service major had agreed on new investments to the tune of US$1 billion.
The debt, which Schlumberger in March calculated at US$1.1 billion, has been giving the company a headache, pressuring its first-quarter results. Talks on the repayment had stalled for a few months and Schlumberger started to get impatient.
Ecuador, which is the smallest member of OPEC, has had a tougher time than other members. In addition to the oil price slump, the country suffered a devastating earthquake last year, with damages estimated at US$3 billion and more than 660 people killed.
Despite these woes, the new government of the Andean nation was quick to signal its willingness to start repaying what’s due Schlumberger. In June, the country’s new Oil Minister, Carlos Perez, said as quoted by Reuters, that the negotiations will focus on interest rates and partial repayments, as well as talk about additional investments.
Total debts that Ecuador owes various oilfield service companies stand at US$2 billion. The Lenin Moreno government is planning on redeeming this partly in cash and partly in government bonds.
Ecuador already paid a small part of its debt to Schlumberger, some US$150 million, in central bank notes that the company can use to pay taxes in Ecuador. Other types of bonds are also under consideration. That leaves about US$950 million yet to be repaid.
Related: Daily OPEC Oil Prices Now Public For The First Time Ever
Ecuador has proven reserves of around 4 billion barrels of oil as of mid-2016, worth around US$200 billion in potential revenue at $50 per barrel. A lot of this oil, however, is located in the Yasuni National Park, where drillers currently have no access.
Daily output is 527,000 bpd according to the most recent OPEC figures for June. The country pledged to cut its production to 522,000 bpd as per the OPEC production cut agreement, but last week, the Energy Minister announced it would no longer adhere to its quota as it was struggling to make ends meet and needed all the oil revenues it could get.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.