By Mercedes Alvaro

Of DOW JONES NEWSWIRES

QUITO (Dow Jones)--State-run Petroecuador has formally asked Ecuador's Ministry of Nonrenewable Natural Resources to cancel a production contract with Energy Development Corporation, or EDC, a subsidiary of U.S.-based oil and gas producer Noble Energy Inc. (NBL).

Petroecuador chief Luis Jaramillo told Dow Jones Newswires on Wednesday that the company hadn't complied with its development plan.

"As president of Petroecuador, I have to look out for the interests of the state. On Nov. 11, the company was notified of a series of things that weren't complied with in its development plan. These weren't complied with, and as such I have asked the Ministry of Nonrenewable Natural Resources to proceed to declare the contract null," he said in an interview.

The move is the latest taken by the administration of President Rafael Correa to gain more control over the energy sector.

EDC has a contract until 2036 to operate the Pacific coast Block 3, which includes the Amistad gas field.

It produces natural gas for use in electricity generation at EDC's 140-MW Machala power plant near the city of Machala, which was completed in 2002. The power plant supplies about 6% of Ecuador's electricity.

A high-level official from the Ministry of Nonrenewable Natural Resources said that according to Ecuadorian law, the Ministry must give the company between 30 days and 60 days to justify and correct any non-fulfillment of contracts.

Otherwise, the contract can be canceled, a process that could take from four months to more than a year.

EDC officials in Quito declined to comment.

EDC isn't the only company against which Ecuador has moved.

Last September, the government started a process to cancel the contracts of the Anglo-French company Perenco Corp. The government had earlier started to seize Perenco's production and in July, Petroamazonas, a Petroecuador unit, took over the operations of the Perenco oil fields.

Since he took office in 2007, Correa, a former economy minister and a leftist ally of Venezuelan President Hugo Chavez, has constantly criticized foreign oil companies in Ecuador.

Correa has said several times that private oil companies should leave the country if they don't invest in their oil fields.

Rene Ortiz, a former OPEC official, said that Petroecuador's latest decision is "unjustifiable."

"With this new move against a foreign company, there is the impression that the government isn't interested in attracting foreign investment and wants to control not only the oil sector but also the gas sector," Ortiz added.

The government has said that, in the future, most of Ecuador's oil industry development will be handled as joint ventures between state-run Petroecuador and other state companies, with Petroecuador as the majority shareholder.

Jaramillo said Tuesday that Russia is interested in investing in gas exploration and production in Ecuador and that it could invest in the EDC block if its contract is canceled.

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