Ecuador hikes state share from oil firm revenues

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QUITO, Oct 5 (Reuters) Ecuadorean President Rafael Correa on Thursday signed a decree to give the state almost all the extra oil revenues generated for foreign firms by high prices, sparking worries of more government control over the Andean country's key sector.

The decree raised the state share to 99 percent from 50 percent of ''extraordinary revenues'' produced by foreign oil companies above a set, contractual benchmark price.

The government expects to receive around 0 million annually from the hike, which will affect the country's largest investors, Brazil's Petrobras and Spain's Repsol, as well as France's Perenco, China's Andes Petroleum and U.S.-owned City Oriente.

The surprise announcement by left-winger Correa echoed measures introduced by Venezuela's President Hugo Chavez to increase state participation in his country's petroleum industry as part of his self-styled socialist revolution.

Ecuador's current law forces foreign oil companies to hand over at least 50 percent of their extra oil revenues. When that law was created last year, oil companies fretted over investments and some threatened to bring lawsuits.

''The government of the citizens' revolution believes the current law is not enough,'' Correa said, using the term employed in his election campaign last year. ''Today we decree these extra revenues be distributed in a more just way.'' Correa, a U.S.-educated economist already spooking Wall Street with anti-free market rhetoric and talk of debt negotiation, said he wants to renegotiate foreign oil contracts to increase the state share, but his government dismissed a Venezuela-style nationalization.

Oil Minister Galo Chiriboga told Reuters later on Thursday night that the revenues hike was meant as leverage in the planned renegotiation with foreign oil firms.

''If they don't like their participation after the hike, we have to sit down and talk,'' Chiriboga said by telephone. He added that he was confident foreign firms would not leave the country over the decree.

Chiriboga said the government will propose that foreign companies switch from current deals, which allow firms to have part of the oil they extract, to new contracts where the state will sell the crude itself and pay the companies a service fee to extract the product.

BIG SURPRISE ''This really took everybody by surprise and we don't have an official position at the moment,'' Federico Cruz, Repsol's spokesman in Ecuador, said of the decree.

A presidential legal counselor said the South America's No 5 oil producer was ready to confront international and national arbitration over the increase.

''We are seeing Ecuador take a path similar to Venezuela,'' Roger Tissot, Latin American analyst with Washington-based consultancy PFC Energy. ''The impact should not be a surprise; oil companies halting investment and we will continue to see a drop in production.'' Private oil companies operating in Ecuador extract nearly half of the country's average daily output of around 530,000 barrels.

Ecuador has said Petrobras, Repsol, France's Perenco, China's Andes Petroleum and U.S.-owned City Oriente have agreed to start renegotiation.

A Petrobras spokesman could not immediately be reached for comment.

Correa earlier this week said the contract renegotiations were going to be amicable.

Analysts say Correa's party's convincing victory in Sunday's vote for an assembly to rewrite the constitution could strengthen his mandate to forge ahead with pledges to increase the state's role in the economy and natural resources.

However, Correa has said his controlling majority will not push for deep oil reforms in the 130-member assembly.

Chavez has started a nationalization program in his OPEC nation and earlier drove companies to accept new contracts allowing the state more participation in the industry.

REUTERS SR SSC1147

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