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Chavez says may create windfall oil tax

Venezuela may create a windfall tax on oil profits generated by rising oil prices, President Hugo Chavez said on Sunday, extending the OPEC nation’s efforts to increase revenue from the oil industry.

The leftist leader said Venezuela could sue Exxon Mobil for unpaid oil taxes, just days after revelations that Exxon won court orders freezing up to $12 billion in Venezuelan assets to ensure compensation for a nationalized oil project. Chavez also repeated threats to cut oil sales to the United States if Washington attacks the South American nation. The windfall tax would represent the fourth increase in oil taxes in as many years as part of Chavez’s drive to increase revenue from the oil industry and increase state control over oil fields, a crusade that sparked the current legal tussle with Exxon. “If the price of oil continues to strengthen between $80 and $100 per barrel, I think it is necessary to apply this tax,” Chavez said during his weekly broadcast held at the Cerro Negro oil project once run by Exxon. “Soon I want to be presented with a recommendation for what we could call the tax on sudden earnings.”

Chavez in 2004 raised royalties on four heavy oil projects, and in 2006 created an “extraction” tax and boosted income tax on the same projects. He did not offer details on the tax, but said it would require increased payments at times of higher prices. Venezuela ally Ecuador in 2007 created a similar tax giving the state 99% of revenue above a set benchmark price. Venezuela’s tax could be a sign that state oil company PDVSA, the principal financier of Chavez’s social programs, is facing growing cash-flow problems despite record-high oil prices that last month broke $100 per barrel. The company’s debt quadrupled last year to reach $16 billion as it took on new social responsibilities including importing food, while international energy agencies showing its oil output slumping.

Exxon battle

Adding to tensions with Exxon Mobil, Chavez said Venezuela could sue the company for unpaid taxes on oil produced at Cerro Negro, which Venezuela took over last May. “They took 500,000 barrels of crude from here without registering it,” Chavez said during his weekly broadcast. “This is ... another reason to sue Exxon Mobil and (make them) pay us for what they stole.” PDVSA later said the figure was 400,000 barrels.

Exxon originally sought $5 billion in compensation for its stake in the Cerro Negro project, PDVSA’s lawyers have said. PDVSA says the value of the assets is close to $750 million. Chavez on Sunday repeated threats to cut oil sales to the United States if Washington moves against him, warnings that last week helped lift oil prices that have recently backed away from their triple-digit records. “If the United States ... attacks Venezuela and tries to harm us, we will have to make the decision not to send a single drop of our oil to the United States,” Chavez said. (Reuters)