QUITO—Ecuador will delay crude shipments by two to three days after a damaged pipeline caused South America's fifth-largest oil producer to declare force majeure on exports, officials said on Friday.
"The cargoes for February are filled, and in March we expect a two-to three-day delay," said a senior Petroecuador official, who works on export contracts and asked not to be named because she was not allowed to speak publicly. "A force majeure doesn't mean cancellation ... we will not suspend shipments."
Oil Minister Galo Chiriboga said oil exports were not immediately affected, but acknowledged that pipeline damage will likely delay shipments, prompting the company to call force majeure.
"We called on force majeure as a precautionary measure in case there are delays with shipments," Chiriboga told Reuters in an interview.
"Force majeure" is a standard clause in commercial contracts that frees parties from their obligations if forces outside their control prevent them from fulfilling the deal.
Chiriboga said state oil firm Petroecuador could take three days to repair the 360,000-barrel-per-day pipeline that was ruptured by a massive landslide. He said 80 meters (260 feet) of the line was damaged and 4,000 barrels of crude spilled.
Petroecuador President Fernando Zurita told Reuters the company has enough storage capacity to keep production at normal levels during pipeline repairs.
Petroecuador has more than 1 million barrels of storage capacity in oilfields in the Amazon, officials said.
Chiriboga said oil flows could be diverted to a privately owned pipeline to avoid a default on oil shipments, which are one of the main sources of revenue to the Andean nation.
News of the pipeline disruption sent oil to a record high above $103 barrel on Thursday, but prices quickly fell after Ecuador said it was not going to cancel exports. Oil eased to $101 on Friday.
Ecuador's SOTE pipeline pumps most of the oil extracted by Petroecuador in the Amazon forest to ports on the Pacific Ocean. The line also carries crude awarded to the state firm by foreign oil operators as part of their contracts.
Ecuador, a recent OPEC member, produces around 500,000 bpd, a little over half of that extracted by Petroecuador. Petroecuador's crude exports leaped to 285,000 bpd in January, but normally average about 180,000 bpd.
Petroecuador shipment delays will mostly affect cargoes of Oriente crude, the company said in a statement. Ecuador exports around 120,000 bpd of Oriente crude.
A 400,000-bpd shipment that was due on Friday and another 360,000-bpd shipment due on Saturday were delayed for two to three days, a Petroecuador official close to exports contracts said.
Disruptions to the SOTE are common as the line runs mostly unprotected from the Amazon to the steep Andes mountains along highways. Heavy rains and flooding in Ecuador have triggered landslides and killed 23 people since January, emergency officials said.
Chiriboga said Petroecuador crude could be rerouted to the privately owned OCP pipeline.
The OCP line runs a similar route and carries only about 150,000 bpd of crude, less than half its 400,000 bpd capacity. A crude rerouting throught the OCP could take a couple of days, a pipeline spokesman said.
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