QUITO -(Dow Jones)- Ecuador's minister for nonrenewable natural resources, Wilson Pastor, said Tuesday that private-sector oil companies have until the end of the week to offer comments on the government's new service contracts.
Last month, Ecuador passed a new hydrocarbons law that aims to expropriate foreign-company operations unless they sign the new service contracts. The new contract models were sent to oil companies last week.
Rafael Correa's government wants to replace current production-sharing deals with service contracts under which private oil companies will be paid a production fee while the government will own 100% of the oil and gas produced.
The government will pay one tariff for operating fields and another for exploration. The fees will cover costs, amortization of investments and provide a reasonable profit, according to the government.
Pastor said he hoped to reach agreements on the new contracts in the next two weeks with few modifications, other than the fees, which will be fixed with each company separately. Comments on the new contracts must be delivered in writing. He also said the fees paid to major companies should be agreed by October and fees paid to smaller ones in December.
The minister is due to renegotiate 33 contracts, grouped into 13 negotiation processes because some companies have more than one contract.
Pastor said that "in general," the contract clauses are the same as international models, except for some additions by the Ecuadorian government. One such stipulation is that any conflicts between the state and private oil companies will be handled by the United Nations Commission of International Trade Law.
Italy's Eni SpA, Spain's Repsol YPF SA, Brazil's state-run Petroleo Brasileiro SA and China's Andes Petroleum Co. and PetroOriental are the major oil companies operating in Ecuador.
The first companies to come to the table to negotiate the fees will be Repsol YPF and the local unit of Chile's Enap. The second group to negotiate will be Andes Petroleum and Petrooriental S.A, and a third group will include Petrobras and Eni.
Pastor said that under the new service contracts, the government expects to take between 85% and 90% of oil revenues against the 65% that currently it receives.
If companies don't want to change to the new contracts, a price will be determined for the liquidation of their current contracts, paving the way for them to leave the country.