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Venezuela Approves Draft Windfall Oil Tax

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    Charles Randall
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    Venezuelan Lawmakers Approve Draft of Windfall Oil Profits Tax
    2008-04-03 13:28 (New York)
    By Steven Bodzin
         April 3, 2008 (Bloomberg) — Venezuela’s legislature approved a
    first draft of a windfall profits tax that would be applied to
    oil sales when crude is above $70 a barrel, affecting companies
    working in the country such as Chevron Corp. and Total SA.
         Following today’s vote and a second vote next week, the law
    may take effect as soon as May 1, based on Venezuelan rules. The
    tax will take half of every dollar between $70 and $100 a barrel
    and 60 percent of every dollar above $100,
    Angel Rodriguez, head
    of the legislature’s energy and mines commission, said today in
    the country’s National Assembly.
         “The rise in price of this product isn’t the result of the
    companies investing in the areas of technology, science, or
    human resources,” Rodriguez said. “It’s primarily been the
    result of intervention by productive countries that have oil
    resources.” Such countries, he said, therefore deserve to
    receive more of the gains to aid their development.
         Venezuela currently requires joint ventures to make up the
    difference any time taxes and royalties don’t add up to 50
    percent of their gross revenue.

         The new tax may be deductible from income tax, Deputy Luis
    Tascon said in the National Assembly debate. He called for that
    deduction to be eliminated before the final vote next week.
         National energy company Petroleos de Venezuela SA will also
    pay the tax, Energy and Oil Minister Rafael Ramirez said Feb.
    19. It will apply to oil, synthetic crude and refined products,
    Rodriguez said in his statement.
         The tax will be applied based on a one-month average of the
    spot price of dated Brent crude oil as quoted by Platts Oilgram
    ,
    Rodriguez said.
         Brent crude for May settlement was trading at $103.60 a
    barrel today on London’s ICE Futures Europe exchange. Prices
    have been above $70 a barrel since late August.

    –With reporting by Grant Smith in London. Editors: Bill Banker,
    Theo Mullen

    To contact the reporter on this story:
    Steven Bodzin in Caracas at +58-212-277-3711 or
    sbodzin@bloomberg.net.

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