QUITO — Ecuadorean President Rafael Correa said Saturday his government will submit legislation to facilitate the expropriation of private oil operations if companies refuse to sign on to new services-based contracts.
The government has been pushing to convert contracts that allow private oil operations to benefit directly from the oil they produce to contracts on which they would be paid a production fee and reimbursed for investment costs.
"My patience with this is up. The oil companies are playing around with us," Correa said during his weekly media address.
Companies at risk include China's Andes Petroleum Co. and Petroriental, Brazil's state-run oil Petroleo Brasileiro SA, Italy's Eni SpA and Spain's Repsol YPF SA.
Correa has repeatedly said his government can not have more delays in changing the contracts.
The private operators have long been resisting the changes, and to reduce their risks, have been investing just enough to maintain output at their existing oil fields. The government began moving toward new contracts three years ago but just last year sent a contract draft to the private companies.
On Saturday, Correa said that every day that passes, "there are millions of dollars going to these companies that should be going to the Ecuadorian state"
Private oil companies in Ecuador are responsible for 42% of the country's production of around 466,000 barrels per day,
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Ecuador's former minister of strategic sectors, Galo Borja, recently said the state has infrastructure and technicians to assume operations from private oil companies if it's not possible to reach an agreement with them. On Thursday, the current strategic sectors minister, Jorge Glas, said the government expects to sign the new contracts in no more than 60 days.
The new contract draft prevents private companies from using the option of international arbitration at the World Bank's International Center for Settlement of Investment Disputes. Instead, legal conflicts will be settled at the United Nations Commission on International Trade Law, or UNCITRAL.
A group of Ecuadorians is pursuing an environmental damages case against Chevron Corp in a long-running suit that one expert for the Ecuadorian court estimated at $27 billion.
According to the draft services contract, before the state pays production fees to private companies, it will retain 25% of gross income from sales of extracted oil. A previous draft had put the amount at 20%.
The draft also has the government retaining transport and sales costs incurred by state-run company Petroecuador, while monthly fees for operational reimbursement costs and new investment, will be adjusted according to Ecuador's Producer Prices Index.
Write to Mercedes Alvaro at mercedes.alvaro@dowjones.com
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