The energy ministers of Ecuador and Venezuela signed here Monday a letter of intent for the creation of a mixed company to build a refinery on Ecuador's Pacific coast and to pursue other petroleum projects.

Ecuador's Galo Chiriboga said that after signing the accord, in which Venezuela will participate as the initial investor, the plan is to build a refinery with the capacity for processing 300,000 barrels of crude per day.

He said that in the next six months "conceptualization studies" will be carried out that will allow the refinery to be built in the coastal province of Manabi and, once the project is finished, other Latin American companies will be encouraged to join in.

Currently, Ecuador is forced to ship crude abroad for refining.

The ministers also outlined details of the participation of Venezuelan state-owned oil giant PDVSA in the Ecuadorian Amazon oil field known as Sacha.

Venezuela's Rafael Ram`rez said that for PDVSA the Sacha operation will be no problem since it has characteristics similar to the oil wells in his country.

At the same joint press conference, Ramirez said that the price of oil, currently around $100 a barrel, is fair.

"We have enough oil, a good volume of inventory, except there are factors that come together to maintain a price that we as producing countries see as fair," Ramirez said.

He said that the increase in the barrel of petroleum is due to "the devaluation that the dollar has suffered over the past three years, speculation in the oil market and the economic crisis in the United States, as well as the geopolitical situation in oil-producing countries."

But Ramirez said that this increase has also produced an "extraordinary" increase in production costs that producing countries have assumed "responsibly."

He gave the example of a drill that used to cost $75,000 but now goes for $400,000.

Venezuela is the world's fifth-leading oil exporter and a top supplier to the United States, while Ecuador only produces around 600,000 barrels per day, though Quito depends heavily on the revenues from petroleum exports.

Copyright 2008 Efe. All Rights Reserved.

Related Project
Refinery of the Pacific
Facility Type: Refinery Owner: Refineria del Pacifico-CEM
Scope: New Construction Location: El Aramo Ecuador