The national assembly, the seat of Venezuela's legislative power, is reportedly preparing a new bill to enforce that royalty increase by law. If implemented, either voluntarily or through law, it would be the second increase in just over a year. In October 2004, the national assembly authorized an increase from 1% to the present 16.7%.
The 1% rate for the Orinoco projects, lower than the royalty for other oil ventures, was authorized by congress in the 1990s with the express intent of stimulating billion-dollar investments in the extra-heavy crude industry at a time when oil prices where around US$15/b and neither the national oil company PDVSA nor private companies were doing any major E&P in Venezuela.
According to the International Energy Agency, the four projects, which once produced some 600,000b/d of synthetic crude from 660,000b/d of extra heavy crude, are now at their lowest production point in at least two years. In January, synthetic crude production fell to 480,000b/d from 574,000b/d in December "due to plant maintenance," the latest IEA report states.
PDVSA has a sizable stake in each of the four projects: Ameriven, where it partners with ConocoPhillips (NYSE: COP) and Chevron (NYSE: CVX); Cerro Negro, where it partners with ExxonMobil (NYSE: XOM) and the UK's BP; Sincor with France's Total (NYSE: TOT); and Norway's Statoil and Petrozuata, again with ConocoPhillips.
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