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Venezuela Demands Royalties
Mar 06, 11:20 AM
By Bloomberg News
Venezuela, the world's fifth-largest oil exporter, is demanding that the country's four heavy-oil joint ventures pay their royalties in crude rather than in cash.
"We can gain a lot more" with this kind of payment, Energy and Oil Minister Rafael Ramirez told reporters Thursday in Caracas. Ramirez said Feb. 16 that the ventures would have the option of paying their 16.67 percent royalties in cash.
The four companies also will not be given additional acreage in order to boost output, Ramirez said. Instead, he said, they will have to improve their recovery rates.
The companies in the ventures include Exxon Mobil Corp., Chevron Corp., ConocoPhillips and France's Total SA.
The ventures take extra-heavy oil from Venezuela's Orinoco belt and mix it with thinning agents so it can flow through pipelines to the Caribbean coast, where it's processed into lighter grades for export. Venezuela says its heavy oil belt holds up to 235 billion barrels of extra-heavy oil.
The venture's extra output "will be commercialized" by Petroleos de Venezuela SA, Ramirez said. The state oil company is a shareholder in all four joint ventures, whose combined output of synthetic crude is about 600,000 barrels a day of extra-heavy crude.
The crude is refined to about 560,000 barrels of synthetic crude, which is exported. Paying the royalty in crude would force the ventures to increase output of extra-heavy crude by about 96,000 barrels a day.
PDVSA will either send the crude to one of the venture's refineries, or resell it. The Caracas-based company can mix the heavy oil with lighter blends, creating a grade that can be exported.
The quartet paid about $1.6 billion in royalties last year, Ramirez said.
"All of the companies have the capacity to increase their output," Ramirez said.
Venezuela may also keep the royalty rate on four heavy-oil joint ventures unchanged, backtracking from threats to raise it. The ventures are now paying royalties of 16.67 percent, and the government had been considering raising the rate to 30 percent.
"We've discussed this a lot," Ramirez said. "But we don't want to change the conditions which are foreseen under the law."
The ventures were approved by congress before President Hugo Chavez was inaugurated in 1999.
Venezuela unilaterally raised the royalty rate on the ventures to 16.67 percent from 1 percent in October 2004, saying rising oil prices justified the increase.
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