Tuesday, May 4, 2010

Ecuador seen attracting oil investment


(Reuters) - Investment by private oil companies in Ecuador is expected to leap to $418 million this year, up 97 percent from last year, the head of the OPEC member nation's Hydrocarbon Industry Association said on Monday.

Oil is Ecuador's top export and President Rafael Correa's government wants foreign oil operators to give up profit-sharing deals and sign new contracts and become service providers.

Analysts say a threat last month by Correa to take over the local assets of private petroleum companies was likely a negotiating tactic aimed at securing new deals favoring the state.

Jose Ziritt, head of the Hydrocarbons Industry Association, said new operating contracts were expected to be signed in 90 days, and that investments could then surpass $418 million.

"This figure, to some extent, shows confidence in the country," Ziritt said at a Reuters Latin American Investment Summit. "When the contract negotiations finish, the (investment) figure could rise."

Spain's Repsol (REP.MC), Brazil's Petrobras (PETR4.SA) (PBR.N), Chinese consortium Andes Petroleum and Italy's Eni (ENI.MI) are the main foreign players in the Andean country.

Foreign oil companies make up about 40 percent of Ecuador's total daily production, with the rest accounted for by state entities Petroecuador, Petroamazonas and Rio Napo.

The negotiations to turn the private companies into service providers have moved slowly and the government is hungry for cash since being cut off from the international capital markets after its $3.2 billion global bond default in 2008.

Ecuador, which has OPEC's rotating presidency this year, has been cut off from the international capital markets since then.

The country's feuds with foreign oil companies in recent years include the takeover of local assets of U.S. oil company Occidental Petroleum (OXY.N). The government declared Occidental's contract had expired and its concession should be returned to state control.

Citing a tax dispute, the government also took charge of the operations of two oil blocks last year that belonged to French oil company Perenco.

Some regional leaders have pushed for more state control over natural resources since Venezuela's socialist leader Hugo Chavez nationalized major oil projects in 2007 and pushed ExxonMobil (XOM.N) and ConocoPhillips (COP.N) out of that country.

A European-trained economist and leftist, Correa has so far shied away from outright nationalizations, but shook up the nation's mining law to strengthen environmental laws and government control over silver, gold and copper projects.

Analysts said that since Ecuador had already taken over local assets of Occidental and Perenco without paying a high political price, the president's latest warning was being taken seriously.

(Writing by Daniel Wallis; Editing by David Gregorio)

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