Venezuela's Chavez unveils new Orinoco extraction tax

Caracas (Platts)--8May2006

Foreign oil companies with extra heavy crude projects in Venezuela's
Orinoco Belt must pay a new "extraction tax" on their production, President
Hugo Chavez said Sunday.
"We are going to create a new oil tax called the extraction tax," Chavez
said during his weekly TV address, 'Hello President'.
The tax will generate hundreds of millions of dollars this year and
around $1 billion in extra revenue in 2007, Chavez said.
The tax will apply to four joint venture projects in the Orinoco Belt
that currently extract over 600,000 b/d of extra heavy crude before turning it
into a lighter, synthetic crude that is exported to normal refineries for
further processing.
Companies with stakes in the Orinoco Belt projects are ConocoPhillips,
Chevron, ExxonMobil, BP, Total and Statoil. All the projects are partnered
with Venezuela's state PDVSA.
Chavez said the companies at present do not pay enough of their profits
in taxes, despite a decision eighteen months ago to raise royalties from a
special concessionary rate of 1% to 16.7%, effective immediately.
That hike was expected to boost government coffers by $587 million last
year alone, according to PDVSA estimates.
Chavez, a socialist who regularly rails against international capitalism,
gave no further details on the extraction tax.
He also said the Orinoco projects should pay 50% income tax instead of
the current 34% rate and royalties could be raised again, to 33%. These
proposals have been made previously by officials at PDVSA and the energy
ministry but still have to be made law by the national legislature, which is
made up entirely of Chavez allies.
Earlier this year, Venezuela took majority control over 32 oil fields
previously operated by private oil companies and in the process hiked income
taxes and royalties. Authorities have warned that the heavy oil projects of
the Orinoco, where companies have invested $13 billion since 1995, would be
the next target.
--Steve Ixer, newsdesk@platts.com


 

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