QUITO July 26 – OPEC member Ecuador said it enacted a law on Monday aimed at increasing state control over the oil sector and that the legislation would permit the state to “liquidate” contracts of non-complying companies.
Oil is Ecuador’s top export and President Rafael Correa’s government wants foreign companies to give up profit-sharing deals and become service providers in exchange for a flat fee.
Ecuador’s minister for non-renewable resources, Wilson Pastor, said the government would pay “a just price” to private companies that do not sign new contracts.
“Our priority is to renegotiate the contracts but if not then we will proceed as the law says. We will pay them a just price,” Pastor told reporters.
“The contracts will be liquidated.”
The law says 25 percent of gross income generated from oil sales will go to the state, which will pay costs, including to companies, from the remaining income.
Spain’s Repsol-YPF, Brazil’s Petrobras , the Chinese Andes Petroleum consortium and Italy’s ENI are among the nation’s top investors.
The Congress failed to vote on the legislation, which was marked “urgent,” meaning the legislature had only 30 days to act before the bill would pass automatically.
The law will govern new contracts the government is preparing, aimed at increasing state oil revenues.
On Sunday, Correa left the door open to dissolving the Andean nation’s legislature and calling for new general elections due to the legislature’s slowness to take up key bills.