Forbes.com, 22 Jan, 2008 - Ecuador's leftist government has begun renegotiating contracts with five international oil companies to boost state control over the country's crude, the oil minister said on Monday.
President Rafael Correa's administration is seeking to replace service contracts with foreign companies that extract crude oil, allowing the state to pay firms a fee for their service, but making sure the government owns all the crude, Oil and Mines Minister Galo Chiriboga told reporters.
Under the current contract, foreign companies own the oil they extract.
"We are the owners of this resource, and we are convinced that this is the best mechanism, as much for us as it is for them, at the moment," Chiriboga said.
Correa, a close ally of Venezuelan leader Hugo Chavez, signed a decree in October that nearly doubled the state's share of windfall oil profits - earnings on oil sold above prices fixed in company contracts.
The five companies with which officials are negotiating are: U.S.-based City Oriente, Spain's Repsol YPF, Brazil's state oil company Petroleo Brasileiro SA, or Petrobras, French-owned Perenco SA, and the Chinese company Andes Petroleum Corp.
Ecuador is South America's fifth-largest oil producer, churning out an average of 510,000 barrels of crude a day.
Last week, Correa's government announced it would invest $2 billion in its oil industry this year to increase production by 11 percent. Correa has blamed the country's less than 3 percent economic growth rate in 2007, one of the lowest in Latin America, on declining oil production.
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