Venezuela could as soon as Tuesday deliver fast-track approval for an increase in the tax and royalty rates it levies on four major foreign investments that account for a quarter of output from the world’s fifth largest oil exporter.
Rafael Ramírez, the energy minister, said on Monday that the proposal to raise tax and royalty rates on the Orinoco River Belt projects, which convert about 600,000 barrels per day (b/d) of extra-heavy crude into lighter, synthetic oil for export, would be submitted for approval by the country’s legislature on Tuesday.
Tax increases on the Orinoco projects had been rumoured, but the speed with which they look set to be implemented mirrors the suddenness with which Bolivia last week announced the nationalisation of its natural gas fields.
President Hugo Chávez, who has offered full backing to Bolivian President Evo Morales for his nationalisation plans, announced only last Sunday he wanted to increase income tax on the Orinoco projects from 34 per cent to 50 per cent, and double the royalty rate from 16.7 per cent to 33.3 per cent.
Mr Chávez enjoys practically full and unalloyed support in the legislature, or National Assembly, and the measure’s prompt approval is virtually guaranteed.
The tax and royalty increases will affect ChevronTexaco, ConocoPhillips and ExxonMobil of the US, as well as Total of France and Statoil of Norway. About $17bn has been invested in the four Orinoco projects since their inception in the late 1990s, and the projects are today estimated to be worth about $33bn.
On Sunday, Mr Chávez said that Venezuela would tap extra revenue from the world oil price boom through what he termed an “extraction tax” on the Orinoco Belt operations, which are known as “strategic association” projects.
“For next year the extra revenue looks like it will come to more than a billion dollars,” he said.
Venezuela’s move to boost rates on the heavy-oil projects follows measures taken last month to convert 32 separate operating contracts, which accounted for about 500,000 b/d, into joint ventures in which the state holds majority stakes.
That move upset some oil multinationals. Total and Italy’s Eni, which objected to the conversions, saw their oilfields unilaterally taken over by the government, so far without compensation.
Humberto Calderón Berti, a former energy minister, warned that Venezuela might also seek conversion of the Orinoco projects into state-majority joint ventures.