PDVSA: New windfall tax will not apply to new crude output by joint ventures
Petroleumworld.com, Apr 26, 2011
A Venezuelan windfall tax will not apply to new crude output by joint ventures between private firms and the state oil company PDVSA until they have recovered their investments, the oil minister said on Monday.
The government of President Hugo Chavez is putting pressure on companies including Chevron, Repsol , BP and Shell to boost production at joint venture projects in the South America's top oil exporter.
A number of companies, including major firms from Russia and China , are also involved in plans to develop Venezuela's Orinoco belt, one of the biggest mostly-untapped hydrocarbon reserves left in the world.
Last week, the country's socialist leader unveiled a new higher rate for its windfall tax, saying the extra revenue from high global crude prices would go into a development fund -- increasing an already hefty burden on companies working in the OPEC member country.
Oil Minister Rafael Ramirez told Reuters in an interview that joint ventures committed to boosting output from existing fields and the new Orinoco projects will not have to pay the tax on the extra barrels they pumped.
"The new developments are excluded and the projects that increase their production," he said.
"The criteria is that the companies bringing money to increase output will not be liable ... Until they've recovered their investments, they will be exempt from the tax."
Analysts cautioned on Monday the higher windfall tax might cause foreign firms to put less money into their local operations and limit PDVSA's ability to fund more production.
"This tax change is likely to have a chilling effect on private sector investment in the sector, especially at a time when the authorities are putting pressure on minority partners to increase investment and production," Nomura said in a note.
Venezuela pumps about 2.8 million barrels per day (bpd) and has enjoyed sharply higher income from its main export in recent months. Big transfers to the state mean PDVSA suffers cashflow problems, however, and its profits fell last year.
SEARCH FOR FUNDING
Under the new decree, PDVSA and its foreign partners will have to pay the government 80 percent of income from sales of oil at more than $70 per barrel, rising to 90 percent when prices reach $90 per barrel. All income from prices over $100 per barrel will be taxed at 95 percent.
U.S. crude for June settled at $112.28 a barrel on Monday, while Brent crude settled at $123.66.
PDVSA has told its foreign partners to secure funding of hundreds of millions of dollars to boost production as soon as possible, sources involved in the joint ventures said.
The oil minister said on Monday the companies' search for funding was "advancing very fast," but that some firms had been granted extensions of several months.
Falling output from the joint ventures is part of a broader decline by Venezuela's oil sector over the last two years.
Energy Ministry figures show crude output dropping to 2.78 million bpd in 2010, from 3.01 million bpd the year before.
As well as boosting output at existing fields, the government is pinning hopes on the development of its huge Orinoco extra heavy crude belt, where it has signed deals with several foreign firms for projects slated to add 2.1 million bpd of new production over the next few years.
One senior source working with the private foreign companies told Reuters the firms were concerned by the tax, despite the exemptions, and by PDVSA's financial health.
"We are worried about PDVSA's financial situation at a time when they have to find their contribution for the new Orinoco belt projects," said the source, who asked not to be named.
"The management of the joint ventures remains a problem, the quality of staff is worsening, and the situation with the service companies is critical because of lack of payments."
Separately, Ramirez reiterated his stance there was no need for an emergency OPEC meeting to talk about global prices, and he said neither was OPEC discussing pricing oil using an alternative currency basket, despite a weakening dollar.
He also told Reuters PDVSA had no plans "right now" to issue new debt. Bonds sold by the government and PDVSA are some of the most traded emerging markets notes in the world.
Reuters / Mon Apr 25, 2011 7:48pm EDT
Send this story to a friend
Copyright© 1999-2009 Petroleumworld or respective author or news agency. All rights reserved.
We welcome the use of Petroleumworld™ stories by anyone provided it mentions Petroleumworld.com as the source. Other stories you have to get authorization by its authors.
Internet web links to http://www.petroleumworld.com are appreciated
Petroleumworld welcomes your feedback and comments,
share your thoughts on this article, your feedback is important to us!
We invite all our readers to share with us
their views and comments about this article.Write to firstname.lastname@example.org
By using this link, you agree to allow PW
to publish your comments on our letters page.
Any question or suggestions, please write to: email@example.com
Best Viewed with IE 5.01+ Windows NT 4.0, '95,
'98,ME,XP, Vista, Windows 7+/ 800x600 pixels