April 16, 2008
CARACAS, Venezuela -- Venezuela moved Tuesday to take a greater cut of windfall oil profits, approving a 50 percent tax on foreign oil companies when crude tops US$70 a barrel.
The tax rate would rise to 60 percent when the average monthly price for benchmark Brent crude exceeds US$100, according to the bill approved by Venezuela's National Assembly. The legislation will take effect as soon as it is published in the official gazette.
Revenues from the tax could reach US$9 billion (euro5.7 billion) annually, Oil Minister Rafael Ramirez said after meeting with lawmakers.
"That's why, for the executive branch, it is urgent to create this law," Ramirez said.
The new legislation will let President Hugo Chavez further extend state control over foreign oil companies operating in Venezuela - home to the largest petroleum deposits in the Western Hemisphere - as he steers the nation toward what he calls "21st-century socialism."
Analyst Juan Carlos Sosa, editor of the Venezuelan oil industry magazine PetroleoYV, said the measure "is going to force foreign companies to think twice about making new investments" in Venezuela, "because their opportunities to turn a profit are diminishing."
Sosa also said the government's estimates on revenue from the tax are exaggerated. Officials "shouldn't be thinking that oil prices are going to remain above US$100 a barrel forever," he said.
Light crude for May delivery jumped as high as US$114 (euro69) a barrel shortly after regular trading ended on the New York Mercantile Exchange on Tuesday. Venezuela's heavy, sulfur-laden crude generally sells for less than light Brent oil from the North Sea.
Chavez nationalized all the heavy oil projects operating in Venezuela last year, but allowed foreign firms to stay on as minority partners in oil fields they once managed under contract.
In 2005, Chavez raised royalty rates to 30 percent from 16.6 percent on foreign firms operating heavy oil projects in the Orinoco region.
Foreign companies operating in Venezuela include Chevron Corp. of San Ramon, Calif., France's Total, Britain's BP PLC and others.
Chevron spokesman Don Campbell declined to comment on the tax until the company could review the legislation and discuss it with its Venezuela office.
Chavez says proceeds from the measure passed Tuesday will be used to fund community development projects designed by neighborhood-based assemblies.