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Quito and Petrobras close stop-gap PSC

Ecuador signed a temporary production sharing contract with Brazil's Petrobras that lowers the company's tax burden, President Rafael Correa said, as the country moves to tighten its control of its upstream sector.

The PSC with Petrobras gives Correa more time to negotiate service deals that would allow the state to keep all the oil that companies produce. It also eases tensions with ally Brazil over recent threats to nationalize the company's oilfields if a deal was not signed.

"Yes, Petrobras has agreed," Reuters quoted Correa as saying. "These transition contracts will lead to service deals in about a year."

Ecuador's ties with Brazil frayed after Correa ejected Brazilian construction outfit Odebrecht over a disputed dam in September.

Correa, who won a September referendum to increase his control over the economy, has struggled for nearly a year to convince foreign companies to renegotiate deals that allowed them to directly sell some of the oil they extracted in Ecuador.

Protracted talks has slashed private investment in the country's oil sector, which is crucial for the state's finances.

Correa said French oil company Perenco also agreed to the temporary deal that immediately lowers a windfall tax that companies have said made their business unprofitable in the Andean country.

Spain's Repsol is also planning to ink the transition deal next week, Correa said.

Details of the Petrobras agreement were not immediately made public. Petrobras is one of the country's largest investors and produces around 35,000 barrels per day.

A Petrobras spokesman declined to comment on the new agreement. Repsol and Perenco officials were not immediately available for comment.

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