Ecuador Pinches Big Oil: 45 Days to Pay Up or Get Out

Ecuador President Rafael Correa told oil companies operating in Ecuador they had three choices: sign agreements with the State for services, cough up 99% of surplus income from commercialization of oil, or end all operations in Ecuador, reported Prensa Latina news on Jan. 28.

In a speech given on Jan. 28, Correa said changes in the country's oil and mining sectors are "top priority" for his administration. He said the focus must be on keeping those resources under the operation of the State.

In October 2007, President Rafael Correa signed an executive decree that increased the state's share of oil revenues. During the same period, Ecuador's top energy official was making claims that the country wanted to seize full ownership of oil resources and production.

Shortly thereafter, foreign oil companies operating in Ecuador began renegotiating contracts to facilitate the country's preferred changes. Dow Jones reported that instead of letting companies produce and sell oil in exchange for a royalty, the government would pay them a fee to extract the oil, which would belong to the state.

Correa gave foreign investment companies a 45-day term to finalize contract negotiations with his government.

Prensa Latina reported that if companies choose to end operations in Ecuador, Correa "pointed out the State promises to return investment funds, and Petroecuador state oil company will assume exploitation of those fields."

Just last week, PFC Energy named the 50 most profitable oil and gas companies. Three of the top companies mentioned were national oil companies ran by China, Russia, and Brazil.

According to the Energy Information Administration, total oil production for Ecuador is 510,000 bbl/d, which ranks Ecuador thirtieth in the world for oil production. In 2006, Ecuador recorded 10 Bcf/d production.

We want to hear from you. Questions, opinions and suggestions are all welcomed by the Rigzone Staff. Write us at .