MercoPress. South Atlantic News Agency

Ecuador claims “windfall” earnings from oil industry

Ecuador told foreign oil companies on Monday they had two weeks to pay the government 317 million US dollars in what the government says are unpaid debts from a windfall royalty approved in 2006.

State oil company Petroecuador said in a statement that the debt stems from the royalty that forced oil companies to hand over at least 50% of extra oil revenues generated above a set benchmark price in their contracts. Ecuador is South America's number five oil producer, and since President Rafael Correa took office earlier this year, his administration has followed closely on Venezuela's President Hugo Chavez oil policies. Correa earlier this month surprised investors by hiking the windfall royalty to 99% amid record high oil prices. Petroecuador said companies that fail to comply with their debts could face "legal actions." Petroecuador said the debtor companies included China's Andes Petroleum; U.S. owned City Oriente and Brazil's Petrobras. These companies are also scheduled to start talks with the government that aim to overhaul their contracts so that the state keeps all the oil extracted by the firms. Correa's decision to hike royalties has an echo of President Chavez' drive to nationalize Venezuela's oil industry. Ecuador's oil companies' trade group has called the hike a virtual nationalization of the sector. Ecuador's Attorney General Xavier Garaicoa has recently called on Petroecuador to pressure companies to pay their debts, and has warned that the state could terminate their contracts if they fail to comply. Analysts say Ecuador's tough renegotiation stance could hurt the country's already feeble oil industry by scaring foreign investment. The private sector produces nearly half of the country's daily output of 530,000 barrels.