Venezuela oil tax to take 50% above $70/bbl

Issues

Venezuela is preparing a ‘windfall’ oil tax to boost the OPEC nation’s revenues from record crude prices, only months after leftist President Hugo Chavez’s nationalization crusade forced out two of the world’s largest energy companies.

Venezuela is in legal battles with Exxon Mobil Corp and ConocoPhillips over Chavez’s broad campaign to boost state control over oil operations that helped spark a wave of resource nationalism efforts throughout the Andes. Legislator Angel Rodriguez told state news agency ABN the new tax will take 50% of oil revenues above $70 per barrel. Companies operating in Venezuela, such as Chevron Corp and StatoilHydro will have to pay 60% of all revenues above $100 a barrel on top of the previous 50% payment. “Because of high oil prices, oil companies have excessive earnings that go beyond reasonable levels of profitability,” said Rodriguez. “One way to distribute them to our people, who are the owners of the oil, is to create this tax.” Company representatives were not immediately available to comment on the news.

Rodriguez said Congress would give initial approval to the measure this week. The tax will almost certainly be approved because the anti-US leader in 2005 won 100% control of the legislature, and now only faces a small dissident faction. It will also apply to state oil company PDVSA, which controls all of Venezuela’s oilfields after Chavez’s 2007 nationalization drive meant to create a socialist state. (Reuters)

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