Ecuador Oil Chief Steps Down

The head of Ecuador’s state oil company said he resigned at the government’s request Wednesday, hours after he demanded an end to a contract allowing Occidental Petroleum Corp. to operate in the country.

“The minister of energy has asked for my resignation and I presented it a few moments ago,” Petroecuador President Carlos Pareja told reporters.

The government has the final say on whether to end the contract with Occidental. There was no immediate word from the Energy Ministry on whether it would cancel the contract.

Ecuador’s review of Occidental’s contract began a year ago, shortly after an international arbitration panel awarded Occidental $75 million against Ecuador for excessive tax withholding on proceeds from its Ecuadorean production.

Petroecuador, struggling with a lack of funds and declining crude production, accuses Occidental of improperly transferring part of an oil well to Canada’s EnCana Corp.

“The position of Ecuador is to declare an end to the contract,” Pareja said in an early Wednesday morning television interview hours before he was forced to quit. “This is a matter of applying the law.”

Analysts have said losing the contract, while not inconsequential, wouldn’t cripple Occidental. The Ecuadorean field represents about 7% of the Westwood-based firm’s worldwide production and 4% of its proven reserves.

In a filing Wednesday with the Securities and Exchange Commission, the company noted Pareja’s effort to get the contract rescinded and his subsequent resignation.

In the filing, Occidental reiterated that the company believed it had honored its contract with Ecuador and that any termination of the pact “would constitute an unlawful expropriation.” Occidental said it also continued to seek “an amicable resolution.”

Oil is Ecuador’s chief export. With oil prices above $60 a barrel, Wall Street sees no immediate threat to the country’s finances if the contract is ended.

“But when oil prices fall, Ecuador may once again find it needs the cooperation of foreign private capital,” said David Rolley, co-head of global fixed income at Boston-based Loomis Sayles & Co.

“Historically Ecuador has had difficulty developing its petroleum resources and bringing them to market without foreign investor participation,” Rolley said. “If the legal environment is unpredictable, the country is going to have significant difficulty attracting new foreign partners.”

Government spokesman Andres Seminario said Pareja had to go because of court action against him dating from his time heading a Petroecuador subsidiary in 2003.