(Adds Petrobras comments)

By Alonso Soto

QUITO, Feb 19 (Reuters) - A call for Ecuador to break ties with Brazil's national oil company Petrobras over a legal dispute will not jeopardize current negotiations to restructure the oil extraction agreement between the two, Ecuador's oil minster said on Tuesday.

"While there is no decision on the termination of a contract, that contract is operational ... yes, negotiations will continue," Oil Minister Galo Chiriboga told Reuters in a telephone interview.

Inspector General Xavier Garaicoa on Tuesday urged the government to end its deal with Petrobras (PETR4.SA: Quote, Profile, Research) in a contract dispute over the Brazilian company's main oil field in Ecuador.

President Rafael Correa, a leftist and a former economy minister, has launched an aggressive drive to rework deals in key sectors from oil to mining to boost state participation in deals he says are unfair to the poor Andean nation.

Petrobras, which extracts around 35,000 barrels of oil per day in Ecuador and is one of the country's largest foreign investors, denied any wrongdoing in a statement.

"Petrobras has at all moments been in contact with the proper authorities and respected the current legal framework," said the company.

Garaicoa said Petrobras transferred part of its participation rights in Block 18 to Japan's Teikoku 1601.T without government approval.