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Sunday, March 02, 2008

Ecuador: Petroecuador Could Lower Oil Production By Sunday

QUITO -(Dow Jones via Feb 29- State oil company Petroecuador will lower its oil production if the SOTE pipeline is not fixed by Sunday, the company said in a statement Friday.

"If the emergency continues, starting on Sunday, Petroecuador will begin to lower the output," the statement said.

Normally Petroecuador produces around 177,000 barrels per day of Oriente crude. Additionally Petroecuador produces around 90,000 barrels per day of Napo crude from Occidental Petroleum Corporation's (OXY) former fields.

Late Thursday, Petroecuador declared the SOTE pipeline to be in a state of emergency because of a rupture caused by a landslide and suspended the pipeline's operations to prevent more infrastructure damage.

Simultaneously, Petroecuador told oil buyers by telephone that it had declared "force majeure" for its exports.

Friday, Energy Minister Galo Chiriboga told Dow Jones Newswires that the government declared force majeure only for its Oriente crude oil exports, not for Napo crude.

According to official data reviewed by Dow Jones Newswires, a shipment of 418, 000 barrels, which left from Balao, was reduced Thursday to 360,000 barrels.

A high-level official said the next shipments could be delayed by three or four days, depending on when SOTE, the nation's main pipeline, resumes operations.

The first shipments that will be delayed are 400,000 barrels that were due Friday, Feb. 29, for Agip SpA, and 360,000 barrels for Valero Energy Corp. (VLO) due March 1.

Petroecuador's international trade management unit notified 11 buyers of Oriente Crude about the force majeure, which implies that the company will defer the date of shipments.

Normally, Petroecuador exports around 120,000 barrels a day of Oriente Crude and 60,000 barrels a day of Napo Crude.

A force majeure is a contractual clause that protects one of the parties from liability if it can't meet obligations due to factors beyond its control.

SOTE normally transports some 350,000 barrels of oil a day from Amazonia to the maritime port of Balao in Esmeraldas province. This includes state oil output and that of Petroleo Brasileiro SA (PBR), Chinese Andes Petroleum, Agip and other private companies.

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