Ecuador, Italian company begin talks on future of oil contract

QUITO, Dec. 31 (Xinhua) -- Ecuadorian Mining and Oil Minister Derlis Palacios and representatives from the Italian oil company Agip began talks here Wednesday on the future of their oil extraction contract.

The talks came after President Rafael Correa on Saturday ordered the suspension of Agip's production (about 25,000 barrels a day) to fulfill the oil reduction plan set by the Organization of Petroleum Exporting Countries (OPEC).

According to the plan, Ecuador must cut 40,000 barrels a day of its production starting from Jan. 1, 2009, after OPEC decided on Dec. 18 to slash 2.2 million barrels a day to stabilize oil prices.

Agip claimed earlier it was not officially notified of the government's decision.

Palacios said he expected to reach an agreement with Agip.

A statement released by the Mining and Oil Ministry said the cause for the reduction was Agip's high production costs and staff expenses.

Agip operated block 10 located in the Ecuadorian Amazons. In 2007, it produced a daily average of 25,579 barrels of oil.

Ecuador will also cut the production of other private and state-owned oil companies, whose percentage of contribution will be fixed next week, the statement said.