Ecuador to cut oil investment, seek financing

By Jose Llangari

PUEMBO, Ecuador, Jan 22 (Reuters) - Squeezed by crashing oil prices, OPEC member Ecuador will slash spending on its key oil sector while it seeks foreign investment, President Rafael Correa said on Thursday.

Correa said his government will earmark around $3 billion for the annual budget of state oil company Petroecuador. In 2008, the leftist government initially approved a $4.8 billion budget for Petroecuador to boost dwindling production.

"We are prioritizing ... we gave them (Petroecuador) $3 billion for operations and investment, but they can invest as much as they can if they are able to get financing via bids or strategic alliances," Correa said. "We have many profitable projects and I'm sure there will be many people interested."

Lower state spending could hurt the Andean country's oil production which has been battered already by falling private investment.

Correa, a popular socialist, boosted state control over the oil sector in a move that analysts say has scared off billions of dollars in private investment since he took office in 2007.

Ecuador has pushed foreign oil companies to rework new deals to give the government a bigger share of oil revenues. However, the government has not yet convinced them to switch to service deals in which the state keeps all their production.

Oil Minister Derlis Palacios said Petroecuador will have to invest only in ongoing and strategic projects such as an upgrade of it 100,000 barrels-per-day capacity Esmeraldas refinery.

"We had to reorganize the budget ... at first we expected a $4.5 billion (budget) or this year," Palacios told reporters. "We will keep ongoing and strategic projects."

In a previous radio interview, Palacios said he saw no benefit for Ecuador under current world oil prices if OPEC decides to slash output again at its next meeting.

Palacios said Petroecuador aimed to keep production levels unchanged this year, but he did not specify if he meant output from all projects currently operated by the state.

Petroecuador's production arm, Petroproduccion, produced around 174,000 barrels of oil per day in November. Petroamazonas, a state-run firm that operates an oil bloc formerly owned by Occidental Petroleum, produced around 102,000 bpd during the same month.