Venezuela Raises Taxes on Orinoco Fields
Wednesday August 30, 10:22 am ET
By Christopher Toothaker, Associated Press Writer
Venezuela Sharply Raises Orinoco Oil Taxes, Pushes for Control of Oil Operations by December
CARACAS, Venezuela (AP) -- Venezuela sharply raised taxes on four heavy oil projects Tuesday shortly after a top official promised that a new law will allow state control over all crude production in the South American country by the end of the year.
Congress approved a bill Tuesday afternoon that hikes the income tax rate to 50 percent for six foreign oil companies working in heavy oil ventures in Venezuela's oil-rich Orinoco River basin. The six companies are ConocoPhillips Co., Chevron Corp., Exxon Mobil Corp., Norway's Statoil ASA, France's Total SA and BP PLC.
Hours earlier, Deputy Oil Minister Bernard Mommer said congress plans to approve by December legislation allowing the state oil company, Petroleos de Venezuela SA, or PDVSA, to take a majority stake in those same ventures.
"We hope to have it ready by Christmas," Mommer said. "All the companies in the belt have been informed that we want a 51 percent minimum stake."
PDVSA currently holds minority stakes in the four Orinoco projects, which extract and upgrade heavy crude. They are the last remaining oil-producing operations in the country not yet under government control after Venezuela brought 33 oil fields under PDVSA-controlled joint ventures earlier this year. Some oil exploration efforts, however, remain under the control of private companies.
President Hugo Chavez's government has steadily squeezed a larger share of profits out of the Orinoco projects, which together produce 600,000 barrels a day of oil.
The National Assembly, which is completely controlled by Chavez supporters, approved on Tuesday afternoon a revised tax code, which raises the income tax rate on the Orinoco ventures from 34 percent to 50 percent. The increase takes effect in January.
Lawmaker Rodrigo Cabezas, president of the National Assembly's finance commission, has estimated that the government could receive as much as an additional $800 million a year for a total of $2.4 billion due to the change.
The move was long expected and follows a May increase in royalties on the four projects from 16.6 percent to 33.3 percent.
The developments come amid an ongoing campaign by Chavez's leftist government to tighten control over the industry and increase oil revenues amid soaring energy prices.
PDVSA, which provides the bulk of Venezuelan state revenue, on Tuesday reported profits of $6.2 billion during the first seven months of this year.
That means it is on track to eclipse last year's performance of $9.4 billion if profits for the remainder of 2006 don't dip below the January-July average, it said in a report on its Web site. Revenues during the first seven months of 2006 reached $33.8 billion.
Venezuela is the world's fifth largest oil exporter and a major fuel supplier to the United States.
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