Ecuador needs new, state-run firm for Oxy fields

QUITO, Ecuador, Aug 25 (Reuters) Ecuador needs to create a company independent from its current state oil firm to keep production up at the fields once operated by Occidental Petroleum , the manager of the fields said.

Carlos Blum, a 50-year-old former Occidental employee who now runs operations at the camps, said the government has to form the new company that will remain state-run but enjoy financial independence.

''If you give this new company the financial and administrative independence we can run the fields,'' Blum, sitting in Occidental's former headquarters in Quito, told Reuters in an interview.

''Ecuadoreans are more than capable of running these fields.'' In May, Ecuador terminated its contract with Occidental over accusations the Los Angeles-based company sold part of an oil block without government authorization.

State oil company Petroecuador immediately took over Occidental's Block 15 and the Eden-Yuturi and Limoncocha fields that total an average of 100,000 barrels of oil per day.

''This will be a self-sufficient company that will operate as a private company with the state as its only shareholder,'' said Blum, who is for the first time working for a state company after stints in Texaco and service provider Halliburton Co. .

''This is the key to maintaining production.'' The fields, with proven reserves of 522 million barrels, are key to Ecuador as the oil-rich nation has failed to boost production in recent years. The government expects the fields to generate 0 million this year.

With elections less than two months away, Roger Tissot, Latin American analyst with Washington-based consultancy PFC Energy, said its very unlikely the next government will give up administrative control over a key oil asset in a country marred with political conflict.

''It's a good idea, but I'm extremely, extremely skeptical this is actually going to happen given Ecuador's political culture,'' he said.

Petroecuador's newly appointed president, Galo Chiriboga, said he supports the creation of an independent company and has already drafted a blueprint of the project.

''I'm sure that before the end of this year we will have this company running,'' Chiriboga told reporters this week.

He added that he is holding talks with other government officials to determine if the project can be approved with a presidential decree or if it will need Congress approval.

In the meantime Ecuador is gearing up for a legal battle over the fields after Occidental filed an arbitration claim seeking billion in damages and the return of its assets.

However, the Andean country keeps investing in the fields and earlier this month approved a 0 million budget for the Petroecuador unit running the fields.

The unit continues to operate with more than 90 percent of its former Occidental Ecuadorean employees.

REUTERS VJ BST0152