MercoPress. South Atlantic News Agency

Ecuador willing to rework contracts with foreign oil companies

Correa moves forward with his promise to act on oil winfall profits

Ecuador offered on Friday to rework the contracts of foreign oil companies that object to a decree sharply reducing their share of windfall oil revenues. President Rafael Correa surprised companies on Thursday by decreeing that the government will take 99% of the profits gained when oil prices rise above contracted levels. Previously, it was a 50-50 split.

On Friday, Energy Minister Galo Chiriboga told Teleamazonas television that if companies don't like the decree "we can negotiate another type of contract". Asked if the government's decision will cause companies to leave Ecuador, Chiriboga said: "I don't think they are going to leave. We are going to pursue negotiations that allow them to stay on terms that are favorable for the country." Chiriboga said a meeting with private oil companies is scheduled for Monday. The companies affected by the decree include Spanish-Argentine Repsol YPF SA, Brazil's Petrobras, France's Perenco SA and China's Andes Petroleum, among others. The current contracts were negotiated when oil prices were 25 to 30 US dollars a barrel, while the price of Ecuadorian oil now stands at 61 US dollars a barrel. In Brazil, Petrobras said it would study the Ecuadorian move only after it formally informed it of the decree. "From our point of view it still isn't official," said company spokesman Celso Mansur. According to an official from the Ecuadorian Economy minister the new system could represent an additional 700 million US dollars for the government which will help face budget shortages given the generous energy subsidies and social programs launched since President Correa took office. However a former Ecuadorian energy minister, Ivan Rodriguez, said Correa's decision "doesn't take into account the increase in production costs registered by oil companies in recent years." "Perhaps this is a part of a strategy by the government and what will come next is another type of contract that will allow a fair sharing of the profits by the government and the companies." Oil companies operating in Ecuador currently can produce and export crude, but the new contracts would have the state export the crude these companies produce, according to Ecuadorian officials. South America's fifth largest producer produces 530.000 barrels of crude oil a day, 363.000 barrels of which comes from private oil companies. The rest is produced by state oil company Petroecuador. Oil is the country's main export and a substantial contributor to the national budget.