[News] Venezuela to end heavy-crude tax break

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Energy & Mines Minister explains decision to end heavy-crude tax break

<http://www.vheadline.com/readnews.asp?id=23100>http://www.vheadline.com/readnews.asp?id=23100



Energy & Mines (MEM) Minister Rafael Ramirez has been explaining a 
Venezuelan government decision to end a tax holiday on four heavy-crude 
upgrading projects in the Orinoco Heavy Oil Belt.

In an interview with New York Times correspondent Brian Ellsworth, Ramirez 
says the move to regulate the payment schedule of royalties and taxes will 
not drive companies away.

President Hugo Chavez Frias had announced this weekend that he the 
royalties would immediately be raised to 16.6% from a measly 1%.   The 
move, of course, sent Venezuelan opposition disinformers howling all the 
way to their paymasters in Washington D.C. but Ramirez defends the decision 
saying that it is justified by record-high oil prices and that the 
companies involved would understand.




"It's absurd that with oil prices at US$53 per barrel anyone is paying 
royalties of just 1%," he said "the oil market has changed fundamentally 
... the era of cheap oil is over."

Orinoco Heavy Oil Belt projects produce 500,000 barrels per day (bpd) out 
of Venezuela's daily output of 3.1 million bpd although some analysts claim 
production is closer to 2.5 million bpd ... updated royalties are expected 
to raise US$766 million a year; up from $46 million.

The Orinoco projects were initiated years ago when Venezuelan oil was 
fetching around US$10 a barrel, and Ramirez says a 1943 Hydrocarbons Law 
allowed the government to raise royalties based on market 
conditions.  ChevronTexaco, Exxon Mobil, ConocoPhillips, BP, France's Total 
and Norway's Statoil have declined comment on the increase.

Chavez Frias says the decision is part of a plan for true nationalization 
of Venezuela's oil industry to increase the government's $42.6 billion oil 
revenues.  He has already set aside $3.7 billion to finance social programs 
across the nation.


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