June 8, 2009 / 12:50 PM / 10 years ago

UPDATE 3-Ecuador vows tougher line on oil companies

(Recasts, updates with Correa quote, adds details)

By Alonso Soto

QUITO, June 8 (Reuters) - Ecuadorean President Rafael Correa on Monday vowed a tougher line against foreign oil companies as the OPEC-nation gears up to rework extraction deals and tighten its grip over the key industry.

The leftist replaced Oil and Mines Minister Derlis Palacios with loyal aide Germanico Pinto, demanding the new minister be firmer with those oil companies that he says still consider Ecuador a colony.

“We are heading in the right direction. These multinational companies know they can’t play around with Ecuador anymore,” said Correa after Pinto, a former lawmaker, was sworn in. “Germanico, (we need) a tougher line to all these companies that still believe they can continue to abuse our country.”

Correa, who was reelected to a fresh four-year term in April, often threatens foreign investors as a way to get more benefits from them in tough negotiations.

Ecuador is currently reworking oil deals with oil companies like Spain’s Repsol (REP.MC) to increase state control over the sector that is crucial to the country’s feeble economy.

Since he took office in 2007 Correa has raised taxes and threatened to end contracts if oil companies don’t switch to new deals that allow the state to keep all the crude they extract in exchange for a set fee.

The government expects to ink new service deals with companies later this year. Correa’s aggressive stance has hurt private investment in the sector and prompted several companies to sue the country in foreign courts.

Pinto, who was the deputy minister of strategic sectors and participated in talks with mining companies over new projects, said he will “apply the law” against those companies.

In March, Ecuador seized part of Perenco’s oil production as payment for a pending debt the government says the French company has with the state.

SOFTER ON MINING

Pinto is expected to keep working closely with mining companies to secure more investment in the nascent sector as the country’s oil revenues plummet.

Correa has been less aggressive in the mining sector, signaling a softer line with foreign companies exploring huge deposits of copper and gold in the Andean country that could be worth billions of dollars.

“Our challenge is to develop the country’s mining potential,” said Correa. “We can’t continue to be beggars while we seat on top of a big pile of gold.”

Ecuador has no significant production of precious metals, but foreign companies like Kinross Gold (K.TO) and Corriente Resources CTQ.TO have found world-class deposits in the country’s Amazon juggle. (Editing by Christian Wiessner)

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