Ecuador wants agreement to end City Oriente deal

QUITO, Feb 25 (Reuters) - Ecuador wants to reach an agreement with U.S.-owned City Oriente to end its oil production deal, the country's oil minister said on Monday, softening the government's tone in talks with foreign oil companies.

Ecuador had threatened unilateral termination of contracts and seizure of assets if City and other companies failed to renegotiate their deals to raise state participation.

"It's not going to be possible to renew it. We have the possibility of reaching a mutual agreement to terminate it," Minister Galo Chiriboga told reporters.

A mutual agreement to terminate the contract means the government must compensate the company for its investment in South America's fifth largest producer, said a top government official who asked not to be named because he was not allowed to speak publicly.

Ecuadorean President Rafael Correa, a leftist former economy minister, has launched an aggressive campaign to rework contracts in key sectors from oil to cell-phone providers.

City's representative in Ecuador, Jose Paez, said a mutual termination agreement was part of talks with the government.

City, owned by U.S. investors, was one of five oil companies renegotiating deals with the government.

City filed an international arbitration against Ecuador in 2006, accusing the OPEC nation of violating its contract by creating a special tax over extra revenues.

Oil block 27 owned by City, which produces 3,000 barrels of oil per day, will be either exploited by state oil firm Petroecuador or offered in an international bid, said the official, who is involved in government talks with companies.

The company's oil production contract was due in 2021.

(Reporting by Carlos Andrade and Alonso Soto; Editing by David Gregorio)