PetroChina renews oil pre-payment facility with PetroEcuador for additional $1 billion (Linked to Record ID#35863)

PetroChina renews oil pre-payment facility with PetroEcuador for additional $1 billion According to an oil pre-payment facility agreement (also known as a presale agreement) signed on January 28, 2011 by PetroChina and PetroEcuador, PetroChina agreed to provide a $1 billion advance payment to PetroEcuador for the renewal of their commercial transaction contract for pre-sale of oil.

The loan from Petrochina provided for an interest rate of 7.08% (previously 7.25% under the 2009 oil pre-payment facility) and a six-month grace period against delivery of six oil shipments of 360,000 barrels from the Oriente field (i.e. a total of 2.16 million barrels) each month, and another two shipments of 360,000 barrels of crude from the Napo field (i.e. a total of 720 barrels) each month also, with a possible volume variation of 5% (up or down) to be decided by PetroEcuador.

The loan had a two year maturity. The oil pre-payment facility from 2009 is captured via Record ID#35863. Then, in July 2017, the Office of the Comptroller General headed by Dr.

Pablo Celi announced pursuant to Acuerdo 024-CG-2017 its intention to conduct a ‘Special Audit’, as authorized by Ecuadorian law to examine acts of public entities.

The Special Audit examined the sources and uses of various financings, and whether those financings were completed in accordance with the relevant applicable laws, regulations and policies.

The Office of the Comptroller General in the CGR Audit Report conclude concluded that certain rules that defined the Government of Ecuador’s methodology to calculate public debt were replaced with laws and regulations that allowed for discretion in the application and use of certain concepts related to public debt and, specifically, that the amounts of advance payments pursuant to certain commercial agreements providing for the advance payment of a portion of the purchase price of future oil deliveries should have been categorized as public debt and included in the calculation of the public debt to GDP ratio.

The CGR Audit Report also set forth some conclusions and recommendations regarding certain interinstitutional agreements between the Ministry of Economy and Finance and Petroecuador, and found deficiencies in the filing of debt documentation.

On April 9, 2018, during the presentation of the CGR Audit Report to the public, the Office of the Comptroller General announced that the Special Audit resulted in indications of: (i) administrative liability of certain public officials, which may lead to the dismissal of those officials; (ii) civil liability of certain current or former public officials, which may lead to fines if those officials acted in breach of their duties; and (iii) criminal liability of certain former or current public officials.

Civil and administrative indications of liability are reviewed by the Office of the Comptroller General.

If the Office of the Comptroller General finds that such former or current officials acted in breach of their duties, it will issue a resolution determining civil and/or administrative liability. A final resolution from the Office of the Comptroller General may be appealed to the district administrative courts.

In April 2018, the Office of the Comptroller General delivered to the Office of the Prosecutor General a report regarding the indications of criminal liability of certain former or current public officials.

Based on that report, the Office of the Prosecutor General initiated a preliminary criminal investigation against former President Correa, three former Ministers of Finance and another seven former or current public officials of the Ministry of Economy and Finance.