UPDATE 5-Ecuador says takes control of Perenco's operations

(Recasts with Ecuador's decision to seize Perenco operations)

By Alexandra Valencia

QUITO, July 16 (Reuters) - Ecuador's state-run oil company Petroecuador said on Thursday that it took control of Perenco's oil operations because the French company ordered a temporary suspension of production.

Petroecuador said in a statement that the Ecuadorean government is now running Perenco's two oil blocks located in the South American country.

Perenco, which had decided to stop producing oil from Thursday, said the Ecuadorean government had confiscated its fields over a tax dispute.

"What they did was to take control of the installations, the fields, and the operations ... that's called expropriation," Perenco's Latin American manager Rodrigo Marquez told Reuters.

"They (Petroecuador officials) spoke with the workers and told them clearly that they were taking control," Marquez added.

Leftist Ecuadorean President Rafael Correa, an ally of Venezuelan leader Hugo Chavez, is trying to increase state revenue from the key oil sector, but has so far shied away from outright nationalizing oil companies.

His government has seized the bulk of Perenco's production since March in a bid to collect more than $350 million it says the company owes in windfall taxes.