MercoPress. South Atlantic News Agency

Oil corporations will overhaul contracts with Ecuador

The five foreign hydrocarbons corporations operating in Ecuador said they are willing to overhaul their contracts with the government. President Rafael Correa who is seeking to increase control over the country's key sector said he wants oil firms to strike an agreement in 45 days.

"We've given the president a very positive, affirmative reply and we are willing to renegotiate contracts", said Rene Ortiz president of Ecuador's Hydrocarbons Industry. Ecuador started negotiations with five oil firms to switch from contracts that allow companies keep part of the oil they extract to deals in which the state will keep all the crude in exchange for a service fee. The companies participating in the negotiations include Spain's Repsol; China's Andes Petroleum;Brazil's Petrobras's; France's Perenco and U.S.-owned City Oriente. During his usual Saturday radio show Correa said that if companies are not willing to strike a deal they can either leave the country or continue to pay a windfall tax that the firms said makes their business unviable. "We are not going to allow them to keep taking our oil," said Correa, a former US educated economy minister who last year grabbed nearly all windfall revenues generated by oil firms above a set contractual price. "I don't see this as a threat, this is actually good for us" said a top industry executive who asked not to be named. "The government has been delaying negotiations and we want to reach an agreement now". Negotiations could lead to a hybrid contract in which companies will still keep part of the oil, but the government receives a bigger share of their revenues. Correa said that oil companies had to opt between overhauling contracts transferring to the Ecuadorian government 99% of windfall profits, and thus changing the nature of the contract, or leave the country. "The oil belongs to us and we are contracting someone to pump it for us and we'll pay for that job, 10 US dollars per barrel but the rest is for Ecuador". Ecuador is OPEC smallest member and South America's fifth largest oil producer with a daily output of around 500,000 barrels. In related news Ecuadorian Agriculture minister Walter Poveda announced that price controls will be imposed on basic foods including rice, milk, corn, bananas and flour in a bid to stem creeping consumer costs. "We've seen prices rise and rise for consumers. We think the state must intervene," Poveda told Teleamazonas television. The new controls will "protect consumers and producers, save and conserve harvests, and provide for a sustainable supply of exports," he added, without detailing the scheme or when it would be introduced.