Aug. 7 (Bloomberg) -- State-owned energy company PetroEcuador and Ivanhoe Energy Inc., a Canadian oil and natural-gas producer, will sign an oil production deal this month, PetroEcuador's head of production said.

Ivanhoe will invest about $4.5 billion over the 30-year lifetime of the agreement to extract crude from the Pungarayacu oil field in the Ecuadorean Amazon, and PetroEcuador will pay Ivanhoe $37 per barrel of crude, said Camilo Delgado, Vice President of PetroProduccion, in an interview in Quito.

``The negotiations are done,'' said Delgado. ``The final legal revision will be carried out by the attorney general and comptroller general starting next week.''

Ivanhoe spokesman Bill Williamson said he couldn't confirm the negotiations or the agreement. ``I don't have direct knowledge of that,'' he said in a telephone interview.

According to PetroEcuador, the field has estimated reserves of 3 billion to 4 billion barrels and could produce 120,000 barrels a day in six years. Ecuador, the smallest member of the Organization of Petroleum Exporting Countries, has struggled to maintain production at its 520,000 barrel daily quota.

PetroEcuador currently produces about half of the country's daily output. Ecuadorean President Rafael Correa has said that signing the deal with Ivanhoe offers no risk to the state as the investment will be up to the company alone.

Development of the field hinges on Ivanhoe's capacity to transform Pungurayacu's oil from tar-like very heavy crude to light crude.

Ivanhoe plans to modify the oil to 21 to 23 degrees API from the field's 4-to-15-degree API oil, Delgado said. API is a gravity scale established by the American Petroleum Institute that measures the relative density of oil.

To contact the reporter on this story: Stephan Kueffner in Quito at skueffner@bloomberg.net

Last Updated: August 7, 2008 12:18 EDT