April 14, 2005
Venezuelan government will replace operating agreements with private companies

(BNamericas.com) - "The 32 operating agreements Venezuela signed with foreign and national oil companies in the 1990s will be replaced by joint ventures in which state oil firm PDVSA owns at least 51%, PDVSA president and energy and oil minister Rafael Ramírez told reporters.

Operating agreements between PDVSA and private companies 'are finished,' President Hugo Chávez said. 'The operating cost of the agreements is US$14 a barrel, compared to the US$4/b cost of producing through our own effort,' Ramírez said. 'In some of these agreements, we earn more by not producing any oil.' (.) Companies could receive new natural gas exploration contracts if they agree to the new conditions (.)

Ramírez said that last year PDVSA paid out US$3bn reimbursing operators for capital investments and operating expenses, and net losses to PDVSA from the agreements were US$260mn. 'That's direct losses from producing under these arrangements,' Ramírez said.

Moreover, the agreements only produce about 500,000 barrels of oil a day (b/d), or less than 20% of Venezuela's total production of around 3Mb/d. A group of eleven operators awarded contracts in the second tender round in the 1990s produced oil worth US$2.17bn in 2004 and received US$1.67bn from PDVSA in return, or 77% of the market value of the oil, which is 'untenable,' Ramírez said.

Some of the agreements had not paid taxes 'from the moment they started to operate,' according to the minister (.).

'We don't understand how, with current oil prices, companies operating in the country declare losses all the time. In some extreme situations, when you add up the costs that PDVSA has to pay plus the missing taxes, the nation as a whole loses money.', Ramírez said".