UPDATE 3-Petroecuador threatens to end Petrobras oil deal

(Recasts throughout with Petroecuador statement clarifying position)

QUITO, April 3 (Reuters) - Petroecuador said on Thursday it has asked Petrobras (PETR4.SA) to respond to charges of a contract breach that could lead to the end of the Brazilian state company's oil extraction deal at its main Ecuadorean oilfield.

Petroecuador's chief Fernando Zurita told reporters the firm had "started the termination process," but the company later said in a statement it "will make an official announcement" once Petrobras answers the charges, brought by the country's inspector general.

Inspector General Xavier Garaicoa has urged the government to end the contract with Petrobras, accusing the company of breaching its contract by transferring part of an oil block without proper government approval.

Petrobras has denied any wrong doing and said in a statement the request "is another chance to show the legality of its actions and will provide Petroecuador all the documentation requested."

State-run Petroecuador said Petrobras has 10 days to provide documents related to the charges.

Any final decision on ending Petrobras contract has to be make by Ecuador's oil minister. The termination process may lead to the nationalization of the company's assets in Ecuador but will likely take months or even years.

Ecuador's left wing President Rafael Correa has made moves to increase state control over natural resources since taking office in 2007.

In 2006, Ecuador ended its contract with U.S.-based Occidental Petroleum (OXY.N) and seized its assets in the Andean nation over similar charges of a breach of contract.

For some time Ecuador has sought to renegotiate its contract with Petrobras, which produces around 35,000 barrels per day, to increase state participation in the deal. (Reporting by Alonso Soto; Editing by Frank Jack Daniel and Christian Wiessner)