Ecuador to cut private output to comply with OPEC

December 29, 2008 - 0:0

QUITO (Reuters) - Ecuador will lower oil output from some private companies to comply with OPEC’s biggest supply cut agreed earlier this month, President Rafael Correa said on Saturday.

Correa said he will reduce production from private oil contracts he says have not benefited his Andean country, mostly service deals in which the government pays a set fee for each barrel of crude extracted.
“We will comply with the OPEC and slash production of private (contracts) where we are losing money,” Correa said during his weekly media address.
The Organization of the Petroleum Exporting Countries agreed on Dec. 17 to reduce supplies by 2.2 million barrels per day. Ecuador, which produces around 500,000 barrels per day, agreed to slash its output by 40,000 barrels.
Correa said Italy’s Eni unit Agip Oil will have to reduce its production. The company holds a service contract and extracts around 20,000 bpd from fields the Amazon jungle.
Correa, a former economy minister, did not say if the company had agreed to the cuts, and did not specify which other companies will have to slash output.
Brazil’s Petrobras and Spain’s Repsol are some of the foreign companies operating under production-sharing deals. Correa pushed for these companies to switch for service agreements earlier this year as oil prices soared.
No company has yet switched to service deals that would allow the government to keep all the oil they extract in exchange for a fee. Analysts say under current prices the service agreements are not profitable for the state.
Ecuadorean oil mix has lost more than 70 percent of its value to trade below $20 per barrel earlier this week.