Germanico Pinto, the minister of non-renewable natural resources, announced the creation of a joint venture between Ecuador's state-owned Petroecuador and China's Sinopec International Petroleum at a meeting in Quito with about 20 Chineses business representatives, said a statement.
Pinto said the new company will seek an investment of one billion dollars to "explore and exploit" Bloc 42 in the eastern part of the Andean country.
Petroecuador was to hold a 60 percent stake in the joint venture, and Sinopec the remaining 40 percent.
Ecuador is OPEC's smallest-producing member, pumping out 500,000 barrels of crude a day.
The Andean nation has become an investment magnet for the energy-hungry Asian giant. Companies such as Andes Petroleum y Petroriental have attracted Chinese capital, and Petrochina has signed a two-year contract for crude oil that "assures Ecuador of the sale of its oil," the statement noted.
The Bloc 42 area is located in the eastern Pastaza province and includes two oilfields with combined proven reserves of 120.1 million barrels of heavy crude.
On Tuesday Ecuador and China signed three cooperation agreements worth 442 million dollars and Quito obtained credit to buy four warplanes, officials said.
The agreements were signed during the visit of Jia Qinglin, chair of the National Committee of the Chinese People's Political Consultative Conference, who met with President Rafael Correa in the Ecuadoran capital as part of a tour of Latin America.
According to the socialist president's office, the economic and technical cooperation agreements include a 1.4 million dollar donation, as well as two lines of credit -- one for 2.9 million dollars payable within 10 years, and another for 438 million dollars to buy four Chinese military planes for Ecuador's air force.
Beijing's direct investment in Ecuador has reached 2.2 billion dollars, making it one of the top targets of Chinese investment in Latin America, Qinglin told reporters through an interpreter.
Trade between the two countries reached 2.4 billion dollars in 2008, a 50 percent increase from the previous year, he said.