October
12, 2004
Venezuela defends tax
increase on four oil projects
(New York Times) -" Venezuela's
energy minister said on that the country's
decision to end a tax holiday on the four
heavy-crude upgrading projects in the
country's vast Orinoco Belt would not
drive those companies away. President
Hugo Chávez announced on his weekly
TV and radio broadcast that he would immediately
raise royalties on the projects to 16.6
percent from 1 percent (…)
'It's absurd that with
oil prices at $53 per barrel anyone
is paying royalties of just 1 percent,''
he said. The oil market has changed
fundamentally, he said, adding, ''We
believe the era of cheap oil is over.
''The Orinoco Belt projects produce
500,000 barrels a day (…)
The projects in question
were put together in the late 1990's,
when Venezuelan oil was fetching around
$10 a barrel, considerably below last
week's average price of $42.67 for the
Venezuelan basket. Mr. Ramírez
said the 1943 Hydrocarbons Law allowed
the government to raise royalties based
on market conditions (…)
''When oil prices
are high, it's natural for countries
to try to bring in more tax revenue
from their oil industries,' said Michelle
Billig, director of political risk at
PIRA Energy, a consulting group in New
York (…)
Soaring prices have nonetheless drawn
investor interest in the Orinoco Belt
projects, which Venezuelan authorities
say contains as much as 235 billion
barrels of heavy crude oil. Both Shell
and ChevronTexaco this year have proposed
new upgrading projects that would comply
with the new terms and conditions (…)
Jay Saunders, an energy analyst at Deutsche
Bank in New York, said the companies
involved ''were getting such great terms
in the first place that there's room
for Chávez to tighten the terms
without getting overly onerous.''
Roger Tissot, director of markets and
countries at PFC Energy in Washington,
says that given the combination of high
prices and Venezuela's location and
reserves, companies are not likely to
leave the country because of the royalty
adjustment (…)".
