Venezuela Could Increase Tax on NatGas Output to 50%

A proposed reform to Venezuela's tax law would increase the tax paid by private companies on natural gas production to 50% from the current 34%, Caracas daily El Universal quoted an official with the Seniat tax authority as saying.

The 34% tax rate, however, will remain for projects pertaining to downstream activities such as refining, transport and commercialization, the article quoted Seniat national tax director Noel Gonzalez as saying.

The reform would also limit the amount of tax-deductible expenses that private companies can claim, Gonzalez said.

E&P gas projects also pay a royalty rate of 20%.

Seniat press officials contacted by BNamericas declined to give additional details.

The proposed change in the law comes just months after the government awarded five new E&P licenses to such high-profile concerns as US oil major Chevron (NYSE: CVX), Russian natural-gas giant Gazprom and joint ventures made up of Brazil's state energy firm Petrobras (NYSE: PBR) with Japanese energy firm Teikoku and another one including Italy's Eni (NYSE: E) with Spain's Repsol YPF (NYSE: REP).

Venezuela's energy and oil ministry plans to start a process to award seven new offshore licenses to explore and produce natural gas in eastern Venezuela in March. The government has repeatedly stated it wants to boost investment in natural gas E&P, citing a need to boost domestic thermal generation, refining and secondary crude recovery, as well as ambitious projects to export Venezuelan gas to Argentina, Brazil and Colombia through two separate proposed pipelines.

The impact on crude E&P could also be considerable as 70% of the almost 7 billion cubic feet a day of gas produced in Venezuela is used for secondary recovery and 90% of all Venezuelan gas is associated, meaning it shares deposits with crude.

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