MercoPress. South Atlantic News Agency

Venezuela increase oil royalties.

Venezuelan President Hugo Chavez announced during his weekly television program a substantial hike, from 1% to 16,6%, of oil royalties paid by foreign companies.

Mr. Chavez said that the provisions of the 1943 Hydrocarbons Bill will be extensive to all contracts. Apparently the law set the production tax at 16.6% but contemplated exceptions that currently, "enable these partners of ours to get away with paying a mere 1% - almost nothing".

"The days of giving oil away for free belong to the past ... There's no reason for them to continue benefiting" from the loophole, which is supposed to apply in special cases and "for reasons that don't exist here - if, in fact, they ever existed" emphasized president Chavez during his Sunday radio and television program "Hello, President!"

The law also states that the provision is to apply strictly "to prolong" pumping oil from operating wells, yet it has also been applied to new fields, stressed Mr. Chavez.

The 2001 Hydrocarbons Law, which amended the 1943 measure, requires the state-run oil company Petroleos de Venezuela SA (PDVSA) to pay the Treasury a 30% tax, Chavez said.

"To those benefiting multinationals I say, 'It's nice you could benefit from and enjoy these near-zero royalties', but now we're putting the house in order".

Companies involved include Exxon Mobil, Total Fina Elf and Conoco Phillips.

The 16.6% levy will be applied to oil companies operating under joint venture agreements along the Orinoco River basin in the country's southeast.

The "world's biggest oil reserves" are located in the area, said President Chavez underlining that his decision merely serves to enforce an executive authority provided for in contracts subject to the 1943 law. The 1% level of royalties was granted by the previous Venezuelan government in the mid-1990s as a special measure to attract foreign investment.

The exception's widespread application has deprived the Treasury of about 3, 5 million US dollars daily, that is almost 1,27 billion per year, concluded the Venezuelan president.