The Business Year

Fernando Larrea

ECUADOR - Energy & Mining

Full Speed Ahead

General Manager, Flota Petrolera Ecuatoriana (FLOPEC)


Fernando Larrea was appointed General Manager of FLOPEC in February 2018, after previously serving as the company’s Commercial Manager among various other positions since 2012. He was also in charge of chartering for Lauderdale Tankers, based in Miami. Prior to his career in the logistics industry, Larrea was a hotelier, working in various executive positions in hotels in Quito and the Galapagos Islands. He graduated as commercial engineer from Escuela Politécnica del Ejército and has a postgraduate degree in hotel management from the Swiss Hotel Management School in Switzerland.

FLOPEC has been adapting to the different trends in the oil transport industry and focuses on staying on top of developments.

What were the major changes in the hydrocarbon transport industry that FLOPEC has had to adapt to?

FLOPEC is an Ecuadorian company that has been in the market for more than 45 years. FLOPEC is only involved in oil transportation, and since 2006, it has been adapting to the different changes and trends in the oil transport industry. EP PetroEcuador sells oil on a free on board (FOB) and delivered at terminal (DAT) basis to its clients, so we mostly deal with buyers of crude oil and providers of oil products. Initially, we provided a transport service with limited tonnage, mostly depending on third-party vessels; however, after 2006, we became part of the biggest pool of Panamax vessels in the world. Thus, we have increased our business and are part of international shipping operations because we use the pooling system. This gives FLOPEC more access to shipping routes, allowing it to become an international shipping company.

How have you expanded your regional operations?

We seek to depend less on the Ecuadorian market and be part of the international market. The Ecuadorian market is shifting; therefore, we need to adapt and compete in the international market. In 2006, 85-90% of Ecuadorian crude oil was exported using Panamax vessels. Over the years, the trend has shifted to bigger vessels, and now, Aframax vessels are the most commonly used vessel for exports. We adapted by transporting 50% of our exports by Aframax vessels. At present, 70% of our business in the Panamax pool is outside the country and is not dependent on the Ecuadorian market. We have operations not only on the West Coast, but also in the Atlantic, Asia, and other regions. As FLOPEC now depends 70% on the international market and because we do not have enough owned tonnage, we have to depend heavily on third-party tonnage. Companies without their own tonnage are even more exposed to market cycles. Therefore, FLOPEC is focused on acquiring more vessels of its own.

How do you finance your capital expenditure on new vessels?

We have always used financing to buy vessels, mostly through international loans. In 2017, we created a new credit facility to refinance the balance of the Aframax vessels we previously bought. Refinancing after 10 years through to the end of the life of a ship is usually how credit works in the maritime sector. We did the refinancing in 2017 with a shipping fund for about USD50 million. Moreover, we already have pre-approval from several banks for a credit facility of USD130 million. We want to start using that to purchase new vessels at end-2018.

What are the main export destinations for FLOPEC?

Chile and Peru have always imported 10-15% of Ecuador’s crude oil over the last 10 years. When the price of crude is high, a great deal of it goes to Panama for storage or transshipment to Asia on larger vessels. When the price is lower, the crude just goes straight to final destination, which is usually 45% to the US west coast, 7% to the US Gulf, 15% to Chile, and 15% to Peru, while Panama buys 15-35% of Ecuador’s crude oil depending on the price.

What is your outlook for FLOPEC and the sector as a whole for the coming year?

It is important for Ecuador to maintain its level of production. For us, it is important that there are new contracts and products to fully utilize our ships and grow our fleet. We need to be on top of production levels and new supply contracts so that we know how many ships are needed. We have a close working relationship with the ministry and are also taking advantage of our strong relationship with EP Petroecuador. The government is currently seeking more investment to maintain and increase oil production in Ecuador and this is crucial to our future.



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