Venezuela's Congress Approves New Oil Tax On Windfall Gains

CARACAS, April 16, 2008 (Dow Jones Newswires)

Venezuelan lawmakers gave the final approval April 15 to a new tax on oil companies meant to grab a share of the windfall oil revenue they obtain in times of high prices.

National Assembly members passed the "special oil contribution of extraordinary prices," previously known as "sudden gains tax" meant for companies that export crude from Venezuela. The new tax is expected to become effective this week, as soon as the approval is published in the country's official gazette.

The approval came two days after President Hugo Chavez publicly demanded that congress move quickly and pass the new law so his administration could gain access to additional funds.

Oil Minister Rafael Ramirez said the new tax should generate roughly $760 million a month, or more than $9 billion a year. The funds will go directly into the Fonden development fund, Chavez's favorite spending fund.

The new levy is expected to become active when the price of Brent crude sits above $70 a barrel. When Brent exceeds that average price threshold for one month, the state will take 50% of the difference between this average and the final sale price of every barrel.

When Brent crude exceeds the $100-a-barrel average, the rate will rise to 60%.

The levy will apply to the gains obtained by state-oil company Petroleos de Venezuela, PdVSA, and its foreign partners such as Total SA, StatoilHydro ASA, BP Plc, and Chevron Corp.

During his time in office, Chavez has demanded higher taxes and royalties from foreign oil companies, particularly after oil prices began to escalate in late 2003.

CARACAS, April 16, 2008 (Dow Jones Newswires)