PDVSA Proposes Hiking Tax on Orinoco Projects to 50%

Map of Venezuela - Orinoco Belt
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Venezuela's state oil firm PDVSA has proposed to the national assembly increasing the tax rate for four extra-heavy upgrading projects in the Orinoco oil belt to 50% from the current 34%, company president and energy and oil minister Rafael Ramírez told reporters.

All other exploration and production projects in Venezuela pay 50% tax and Ramírez said it does not make sense that some oil projects pay one rate and others a different one.

"The existing Orinoco oil belt projects pay 34%, something we don't agree with," he said. "We want to introduce a reform to the tax code next year in which we are proposing that all oil activities pay 50%."

This would be the third tax hike for the four projects in less than a year. First they had their royalty rate increased from 1% to 16% in late 2004, then the government announced it would levy a surtax of 30% on all production deemed "surplus" and now comes the proposal for a new, higher tax rate.

The four extra-heavy crude upgrading projects in Orinoco - Ameriven, Petrozuata, Sincor and Cerro Negro - in which PDVSA partners oil majors such as US firms ConocoPhillips and ExxonMobil (NYSE: XOM) and France's Total, are already producing almost 600,000 barrels a day of syncrude.

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