Royalty Hike Earns PDVSA Extra US$1.64bn from Orinoco Projects

Map of Venezuela - Orinoco Belt
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An increase in the royalty rate applied to extra-heavy crude joint ventures in Venezuela's Orinoco oil belt to 16.7% from 1% generated extra revenues of US$1.64bn in 2005, Venezuela's state oil firm PDVSA said in a statement.

The 1% royalty was designed by the previous administration of Rafael Caldera in the mid-1990s in order to attract foreign investments in riskier extra-heavy crude ventures at a time when oil was trading at around US$15 a barrel.

However, President Hugo Chavez increased the royalty rate to 16.7% in late 2004 in the face of higher international oil prices without consulting private companies operating the four existing extra-heavy crude joint ventures with PDVSA.

According to PDVSA, the four Orinoco projects currently produce some 600,000 barrels a day (b/d) of synthetic crude, but the International Energy Agency (IAE) disputes that figure, saying actual output is closer to 500,000b/d.

In the same press release, PDVSA said its financial results from 2005 would be the last to be presented to the US Securities Exchange Commission (SEC) for review. Doing so restricts "our flexibility and operational capacity," PDVSA president and energy and oil minister Rafael Ramirez said in the statement.

PDVSA has yet to present its 2004 or 2005 financial results to the SEC.

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