The people of Ecuador are rising up to refound their country as a pluri-national homeland for all. This inspiring movement, with Ecuador's indigenous peoples at its heart, is part of the revolution spreading across the Americas, laying the groundwork for a new, fairer, world. Ecuador Rising aims to bring news and analysis of events unfolding in Ecuador to english speakers.

Tuesday, April 15, 2008

Ecuador seeks new oil deals in 6 mos, control hike

By Alonso Soto

QUITO, April 14 (Reuters) - Ecuador will seek to persuade foreign oil firms to downgrade their status in the country from joint-venture partner to contractor, the country's top energy official said on Monday, in a move that could hamper investment in the key sector.

Oil Minister Galo Chiriboga said the government plans to sign temporary agreements with firms that in six months would change from participation deals to service contracts, in which the state would keep all the oil they extract in exchange for a service fee.

"They knew from the start we wanted to switch to service deals ... we hope they agree," Chiriboga told reporters. "For the judicial security of both parties that period (to change contracts) has to be reduced."

However, Chiriboga said the service-contract status could be modified for companies to be compensated for their investment, and that the government could still seek joint ventures with those firms.

Current participation contracts allow companies to keep part of the oil they extract. Chiriboga did not give details of a new service contract.

The announcement came as a surprise to foreign oil executives who said they were close to an agreement with the government to boost state participation in deals that started earlier this year.

"If things are not clear, nobody will invest, it is as a simple as that," an oil company executive, who asked not to be named because he was not allowed to speak, told Reuters.

President Rafael Correa, a leftist economist, has said since early in his government that he wants companies to switch to service contracts. Correa has launched an aggressive drive to rework foreign contracts to boost state income in key sectors of the economy from oil and mining to cell-phone providers.

Augusto Tandazo, an oil analyst who was an adviser to Correa during his presidential campaign in 2006, said the government's announcement could be used as a bargaining tool in negotiations to obtain more benefits.

"Also take into account that we will have general elections later this year, and this is a hot topic," Tandazo said. "This could be a political move."

A government-controlled assembly rewriting the country's constitution is expected to call for early presidential and congressional elections in the second half of this year.

Foreign oil companies renegotiating their contracts include Brazil's Petrobras, Spain's Repsol, China's consortium Andes Petroleum and France's Perenco.

Ecuador, South America's fifth-largest oil producer, has an output of around 510,000 barrels per day, of which private companies produce nearly half. (Reporting by Alonso Soto; editing by Matthew Lewis)

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