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Apr 17, 2003 | 20:43 GMT

2 mins read

Ecuador's Pipeline Outlook Positive Despite Ratings Problem

Moody's Investors Service withdrew its ratings for Oleoducto de Crudos Pesados (OCP) Ltd. and Oleoducto de Crudos Pesados Ecuador SA, the sponsors of the OCP heavy-crude pipeline being built in Ecuador. The project previously had carried Moody's lowest investment-grade rating after a reduction last October based on concerns over potential project delays, cost overruns and payment issues. Moody's said its move to withdraw the rating altogether stemmed from "inadequate financial and operating information required to monitor" the project. The decision, however, will have little practical effect on the $1.3 billion OCP project, since the pipeline has largely been completed. The president of Ecuador's Central Bank, Mauricio Yepes, said April 13 that the pipeline would begin operating in September, with a capacity of 220,000 barrels per day, rising to 390,000 bpd in January 2004. The developers of the OCP project are even more optimistic. A senior executive for Calgary-based Ecana, the lead company in the OCP Ecuador consortium, said April 14 that the project is 96 percent finished and that they will begin loading crude into the pipeline in a matter of weeks. Ecana expects the pipeline could reach its full capacity of 450,000 bpd as early as this fall. This is very good news for Ecuador's newly elected president, Lucio Gutierrez, who has fallen on hard political times. Gutierrez faces stiff opposition to his domestic agenda, and an alleged assassination plot recently was revealed. Gutierrez's political problems are threatening his ability to make the economic reforms required to secure some much-needed support from the International Monetary Fund. Completion of the pipeline would allow more crude to start flowing from Ecuador's eastern Amazon region and should begin to provide a much-needed boost in government income before the end of the year. The OCP pipeline in the past has been a < a href="/analysis/activists_pr_victory_means_more_problems_ocp">magnet for protest by local indigenous groups and their international supporters, but that should not be a problem moving forward. Unlike many other pipelines in the region, 99 percent of the OCP is buried. So even if unrest in Ecuador worsens and turns more militant, the OCP will not be an easy target for disruption. From that perspective, and also from a financing standpoint, OCP's problems are mostly in the past.

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