November 24, 2010 / 12:28 AM / 9 years ago

WRAPUP 2-Ecuador signs new oil deals, Petrobras balks

 * Chile’s ENAP, Spain’s Repsol, three others reach accords
 * Brazil’s Petrobras rejects new contract
 * Oil companies to invest $1.2 billion under new pacts  (Adds details, quotes throughout)
 By Hugh Bronstein and Santiago Silva
 QUITO, Nov 23 (Reuters) - Five oil companies operating in Ecuador agreed to new service deals on Tuesday, leaving Brazil’s Petrobras as the only large operator to reject contracts aimed at increasing state petroleum revenues.
 The leftist government of Rafael Correa will hail the two-year-long negotiations as a victory for its resource nationalism policy, though some analysts say the saga could have a dampening effect on much-needed foreign investment.
 Chile’s state-owned energy company ENAP, Spain’s Repsol (REP.MC), Italy’s Eni (ENI.MI)  and Chinese operators Andes Petroleum and PetroOriental all agreed to contracts that will turn the companies into flat-fee service providers.
 The pacts replace previous profit-sharing agreements.
 Wilson Pastor, Ecuador’s minister for oil policy, said Brazil’s state-controlled oil company Petrobras (PETR4.SA)(PBR.N) declined to sign. It will be paid “market prices” for its assets in Ecuador, Pastor said, and has 120 days to turn its operations over to the state.
 “We will a seek an orderly transfer, at a fair price,” he said, adding that the companies that signed the new pacts will invest $1.2 billion in Ecuador under the deals.
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 The new contracts are key to Correa’s agenda as he seeks to increase state revenue after a 2008 bond default that restricted Ecuador’s access to international capital markets.
 Repsol, with 41,800 barrels per day of production in Ecuador, is by far the biggest private operator in the country. Under its new contract it will receive a $35.95 per-barrel fee from the government.
 The other four companies that reached agreements on Tuesday will be paid from $16.72 to $41 per barrel.
 “I can say with satisfaction that all the goals and objectives that the government had for this negotiation have been reached,” said Jorge Glas, Ecuador’s strategic sectors minister.
 Petrobras’ Ecuadorean unit has output of around 19,300 barrels per day (bpd) from its Block 18 in the Amazon province of Orellana. The operation represents a tiny amount of the overall output of Petrobras, which produces nearly 2 million barrels of crude per day in Brazil.
 Taking over Petrobras’ fields will increase the burden on state oil company Petroecuador to maintain crude exports by Ecuador, an OPEC member, which have lagged those of more investor-friendly countries such as neighboring Colombia.
 Producers with small fields in Ecuador — such as Canada Grande, U.S. company EDC and China’s CNPC — will also be paid for their investments and leave the country.
 BETTER-THAN-EXPECTED RESULT
 Tuesday’s result was better for the government than some had expected after Correa warned over the weekend that a pair of companies would not sign the new accords.
 But some said Ecuador was paying a high price for the tough stand it has taken with the private sector.
 “This has been a pyrrhic victory,” said Ramiro Crespo, head of Analytica Securities in Quito. “The cost has been too high. Private companies have not been investing in Ecuador because of the uncertainty about these contracts, and private oil production has fallen as a result,” he said.
 Exports from private operators sank 27.6 percent last year to 98,869 bpd versus 2008 while companies haggled with the government over the new deals. Private crude output fell 14.4 percent last year versus 2008 to 204,511 bpd.
 Correa, who is part of a regional bloc of leftist leaders including Venezuela’s firebrand socialist Hugo Chavez, has had a fractious relationship with foreign investors.
 In 2008 he ordered the default on Ecuador’s global bonds, calling the obligations illegitimate. Since then Ecuador has made up for its lack of private foreign investment through bilateral loans, mostly from China.
 Last year Ecuador took over the local operations of French oil producer Perenco following a tax dispute.  (Additional reporting by Alexandra Valencia; Editing by Gary Hill)   

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