Ecuador Signs New Oil Contracts; Some Companies To Leave

Ecuador said Tuesday that it had reached agreements to modify contracts for a number of foreign oil companies operating in the Andean nation.

The administration of President Rafael Correa had set a deadline of midnight Tuesday for the process of replacing production-sharing deals with service contracts for foreign operators, turning them into service providers for the exploration and extraction of hydrocarbons. Private companies will receive a fee rather than sharing in profits.

A number of companies reached agreements, such as Italy's Eni SpA (E, ENI.MI), Spain's Repsol YPF SA (REP, REP.MC), and Chilean state oil and gas company Empresa Nacional del Petroleo SA, or Enap.

Repsol will receive a tariff of $35.95 per barrel under its new contract.

Officials said that China's PetroOriental reached an agreement for Block 17 and will receive a tariff of $41 per barrel. PetroOriental will invest $187 million in Block 14, where a new contract was also reached.

China Andes signed a contract for the Tarapoa Block that will run to 2025, and in which the company will invest $424 million. It will receive $35 per barrel.

No agreement was reached, however, with Brazil's state-run Petroleo Brasileiro SA (PBR, PETR4.BR), nor for Block 11, held by China National Petroleum Corp. The government was also unable to reach a deal with U.S-based Noble Energy Inc. (NBL).

Minister of Strategic Sectors Jorge Glas said that the operations of companies that failed to reach an agreement will pass to the state starting Wednesday.

"The petrol is now once again ours," Glas said.

Minister of Nonrenewable Natural Resources Wilson Pastor said that Ecuador will receive $1.2 billion in investments with the new contracts.

He said he expects an orderly withdrawal of the companies that didn't sign the new contracts.

At a ceremony, officials said Eni will invest $120 million in its oil fields, and receive a tariff of $35 per barrel of crude.

Earlier in the day, Pastor said that Enap's contract with Enap will be for a 15-year period, and that Enap will invest $71 million in the oil fields.

The left-leaning Correa administration has taken a number of steps to increase government control in the natural resources sector since Correa took office in early 2007.

-By Mercedes Alvaro, Dow Jones Newswires; 5939-9728-653; [e-mail]