Venezuela Approves Draft Windfall Oil Tax

[Charles RandallParticipant]

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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