Lawmakers Recommend Hiking Royalty for Orinoco Projects to 30%



A special committee of lawmakers from Venezuela's national assembly will recommend the executive power increase the royalty rate on four extra-heavy upgrading projects in the Orinoco oil belt to 30% from 16.7%, Caracas daily El Universal reported.

Energy and oil minister and state oil firm PDVSA president Rafael Ramirez said late last year that pushing such a royalty hike was going to be one of this year's priorities for his office.

PDVSA has also proposed to the national assembly increasing the tax rate for the projects to 50% from the current 34%, Ramirez has said.

The four such projects currently operating in the Orinoco produce 660,000 barrels a day (b/d) of extra-heavy crude that is upgraded into some 600,000b/d of synthetic crude. PDVSA is partners in all four projects with such high-profile oil majors as US oil firms ExxonMobil (NYSE: XOM), ConocoPhillips (NYSE: COP) and Chevron (NYSE: CVX), France's Total (NYSE: TOT), UK firm BP (NYSE: BP) and Norway's Statoil (NYSE: STO).

In 2004 the royalty rate was increased dramatically to 16.66% from 1%, eliminating what was envisaged in the 1990s during the administrations of Carlos Andres Perez and Rafael Caldera as the key fiscal incentive to attract investment in the then-untried Orinoco projects.

The incentive was considered necessary because such projects are traditionally more expensive than standard E&P projects since the extra-heavy crude needs to be upgraded before it can be refined.

However, the Chavez administration argues companies can still make a profit with higher royalties today given current high oil prices in the international market.

The committee is headed by leading pro-government lawmaker Rodrigo Cabeza, who says the proposal for a higher royalty rate stands a good chance of passing because the national assembly is mostly composed of pro-government lawmakers.

Opposition political parties refused to take part in the December 4, 2005, legislative elections and have denounced the assembly as "illegitimate" since the abstention rate in the vote neared 80%.

About Business News Americas: Business News Americas is a multilingual news and business information service that covers the most important original stories in 11 different business sectors throughout Latin America everyday. Visit BNamericas to access our real-time news reports, 7-year archive, Fact File company database, and latest research reports. Click here for a Free two week trial to our Latin America Oil & Gas information service.

RELATED COMPANIES
Company: BP plc more info
Operates 32 Offshore Rigs
 - BP Returns To Solar With Investment In Lightsource (Dec 15)
 - BP: 2017 'Massive' Year for Global Upstream Projects (Dec 07)
 - BP Seeks Stake In Cairn Energy Senegal Assets (Nov 20)
Company: Exxon Mobil Corporation more info
Operates 16 Offshore Rigs
 - Exxon, Petrobras Form Alliance To Develop Oil, Gas Projects (Dec 14)
 - ExxonMobil to Lead Construction, Ops of Mozambique LNG Facilities (Dec 13)
 - ExxonMobil Jumping in to Mexico Fuel Market With First US Cargo (Dec 06)
Company: Statoil more info
Operates 1 Offshore Rigs
 - Sharp Fall In Applications For Norway's Arctic Oil Permits (Dec 05)
 - Statoil Greenlights $6B Flagship Arctic Oil Project (Dec 05)
 - Partners to Invest in New Gas Module at Troll C Platform (Nov 07)
Company: Total S.A. more info
 - Total Starts Up Antwerp Refinery And Petrochem Complex After Upgrade (Nov 30)
 - Hoegh LNG: Pakistan LNG Import Project Consortium Folds (Nov 16)
 - France's Total Buys Engie's LNG Business For $1.5B (Nov 08)
Company: ConocoPhillips more info
Operates 12 Offshore Rigs
 - ConocoPhillips Vows Financial Discipline As Aims To Boost Output (Nov 08)
 - ConocoPhillips' Profit Beats Estimates, But Budget Cut 10% (Oct 26)
 - Most US Gulf Oil Output Offline Ahead of Tropical Storm Nate (Oct 06)
Company: Chevron Corporation more info
 - ExxonMobil Jumping in to Mexico Fuel Market With First US Cargo (Dec 06)
 - Chevron To Study Mexican Oil Block, No Drilling Seen In First 4 Years (Nov 30)
 - Buying Texas Oil at New Mexico Prices: Majors Go West for Shale (Nov 14)
Company: PDVSA more info
Operates 14 Offshore Rigs
Manages 26 Offshore Rigs
 - Paralysis At PDVSA: Venezuela's Oil Purge Cripples Company (Dec 15)
 - Cuba Takes Over Venezuela Stake In Refinery Joint Venture (Dec 14)
 - Union Leader: PDVSA's Amuay Refinery Halts Distillation Unit (Nov 30)