QUITO -(Dow Jones)- Ecuador's Mining and Oil Minister made a new offer Thursday to reduce the tax on oil companies' windfall profits.

The offer - similar in many ways to one made in April - depends on the companies changing their contracts to service contracts, withdrawing arbitration claims at the World Bank's International Center for Settlement of Investment Disputes, and maintaining current investment and output levels.

Mining and Oil Minister Galo Chiriboga last month noted the companies had to change their contracts to service contracts in 120 days for the offer to be valid. But, in the latest offer, current participation contracts would be changed into service contracts after a one-year temporary period, Chiriboga said Thursday.

Under the current participation contracts, the state receives a percentage of profits from oil production.

Under the new service provider contracts, companies would be paid a production fee and reimbursed for investment costs, although all of the recovered crude oil will belong to the state.

The new service contracts will also prohibit foreign companies from seeking international arbitration awards, requiring them to rely instead on Ecuadorean courts to settle any disputes.

"The proposal will be made tonight to oil companies. This is a sign of Ecuador´s good will. Our last proposal for a preliminary agreement didn&# 180;t have good acceptance by private oil companies and now we are offering to sign deals according to the agreements reached in April. If companies like and accept this proposal, we can sign the agreement tomorrow," Chiriboga said Thursday.

According to the April agreements, state participation in oil production will rise from 12.5% to 25% in some cases and from 25% to 30% in other cases, depending on each contract.

The companies involved include Spanish-Argentine energy group Repsol-YPF (REP) , France's Perenco, Brazil's Petroleo Brasileiro SA (PBR), U.S.-owned City Oriente, the Chinese-owned Andes Petroleum and Canada Grande.

The new proposal came after Repsol-YPF last Monday filed an arbitration claim against Ecuador with the ICSID, and after Federico Cruz, Repsol's spokesman in Ecuador, said that Repsol will end its arbitration process if the company reaches a favorable agreement about its contract in the andean country.

In October, the administration of President Rafael Correa increased the state's take of extraordinary oil company profits to 99% from 50%. In January, it began negotiations to convert all oil company participation contracts into service contracts.

The oil companies have said the measures make operating in Ecuador unprofitable.

In April, Chiriboga said that the government and private oil companies had reached a deal that called for a two-year transition, but President Correa halted those talks.

-By Mercedes Alvaro, Dow Jones Newswires; 5939-9728-653; mercedes.alvaro@ dowjones.com