New throughout, adds details on contract from press conference, comments from officials
By Alexandra Valencia
QUITO, March 3 (Reuters) - Ecuador's government awarded an onshore oil contract to a consortium led by China's state-owned producer Sinopec 600028.SS on Monday, in a push to grow crude output from the country's Sacha block.
The block is Ecuador's most productive, located in the country's northeastern Amazonian province of Orellana. It pumped 77,000 barrels per day (bpd) last year.
The 20-year production sharing contract for Sacha would be run by a consortium comprising Sinopec and Canada's New Stratus Energy NSE.V.
Energy and Mining Minister Ines Manzano said the consortium has four weeks to sign the contract, and pitched the deal as a way to upgrade an aging but still productive asset.
"It's been said that Sacha is the (local oil sector's) crown jewel, but I'm sorry to say its a rusty crown and the jewels need to be polished," she said at a press conference, stressing that the block is not being privatized or sold off.
"But it will be operated with greater efficiency," she said.
New Stratus said in a statement on Monday announcing the deal that it includes an upfront cash payment of $1.5 billion, $600 million of which it will pay, with the contract expected to formally commence later this month.
Sinopec holds a 60% stake in the consortium, and New Stratus the remaining 40%.
Ecuador is one of Latin America's smaller oil producers, currently producing 465,000 bpd, far behind regional heavyweights Brazil and Mexico.
The project could add some 373 million barrels of oil output over the next two decades, with government coffers expected to take 82% of the income generated assuming an average price of $62 per barrel, according to the Ecuadorean government.
Guillero Ferreira, deputy hydrocarbons minister, told reporters that the contract should help boost Sacha's output to 100,000 bpd over the next three years.
In the past, officials have said Ecuador does not have the funds or the technology needed to best develop Sacha.
Beyond the upfront cash payment, New Stratus said the consortium has agreed to spend more than $1.7 billion during the contract's initial phase to finance a ministry-approved development plan.
Authorities have defended direct negotiations with the consortium, versus opting for a public auction, arguing the law allows such a direct award.
The contract comes a little over a month before conservative President Daniel Noboa will face off against leftist Luisa Gonzalez in a April 13 run-off election.
(Reporting by Alexandra Valencia; Writing by Julia Symmes Cobb; Editing by David Alire Garcia and Sonali Paul)
((david.aliregarcia@thomsonreuters.com; +52 55 5282 7151; Reuters Messaging: david.aliregarcia.thomsonreuters.com@reuters.net))
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