CORRECTED - Petroecuador will not seek end of Petrobras deal

(Corrects last paragraph to show that investors feared Ecuador could take over Petrobras operations, not Petroecuador)

QUITO, Aug 19 (Reuters) - Ecuador state oil company, Petroecuador, will not seek to end Brazil's Petrobras oil extraction deal at its main oilfield over a contractual dispute, the company's chief told a local magazine.

In April, Petroecuador asked Petrobras to respond to charges of a contract breach that could have led to the nationalization of the company's largest oilfield in South America's No 5 oil producer. The state company had to determine if the charges were strong enough to ask for an end of Petrobras deal.

"There is no termination process. That was the deal reached in conversations between the president and Petrobras' people," Petroecuador chief Luis Jaramillo told local magazine Vanguardia this week.

President Rafael Correa, a leftist who wants more state control over the key oil sector, agreed earlier this month with Petrobras (PETR4.SA) and two other foreign oil companies to negotiate new service contracts that would make them contractors instead of joint-venture partners.

Still, Jaramillo said the government launched a probe to determine if Petrobras' Palo Azul field shared it core reserve with Petroecuador and depending on the findings it could change the terms of the contract.

Former Inspector General Xavier Garaicoa had urged the government the end the contract over charges that questioned Palo Azul's ownership. The attorney had also said the company illegally transferred part of an oil block to another firm.

The charges sparked fears among investors that Ecuador could take over Petrobras operations as it did with U.S.-based Occidental Petroleum (OXY.N) in 2006 over similar accusations.

(Reporting by Alonso Soto; Editing by David Gregorio)