MercoPress. South Atlantic News Agency

Venezuela demands tax and royalty arrears from oil industry

Venezuela's Energy minister and head of the government owned petroleum company PDVSA said Wednesday that foreign corporations operating in the country will have to pay an additional 30% royalty on excess crude oil production.

Addressing Congress Rafael Ramirez said that Sincor SA - made up of France's Total, Norway's Statoil ASA and Petroleos de Venezuela, or PDVSA - was producing almost double its authorized quota of 114,000 barrels per day and was pumping crude from an area in the huge Orinoco oil belt larger than the 250 square kilometers it had been awarded originally.

Mr. Ramirez said Sincor (in which Total has a 47% stake, Statoil 11% and PDVSA 42%) is currently producing about 210,000 barrels per day.

In Venezuela the world's fifth largest crude exporter, foreign oil firms such as Total, Spanish-Argentine Repsol YPF, Brazil's Petrobras and the U.S. firms Chevron, Exxon Mobil and Conoco-Phillips all operate in association with PDVSA.

President Hugo Chavez has claimed that foreign oil companies in Venezuela have been pumping oil there too cheaply and evading their tax obligations.

Last November in a move expected to raise 1.3 billion US dollars per year for the country's Treasury, the government unilaterally raised royalties to foreign petroleum corporations from their former 1% to 16.6%.

Mr. Ramirez presented legislators a "detailed legal study" of the 32 contracts signed with foreign companies in 1992 and 1997 which allegedly are "illegal". "PDVSA simply handed over to third parties the exploration and production activities reserved by the Nationalization Law to government owned companies or to foreign companies having association agreements with a local government company".

The minister was convened to the National Assembly at the request of a special legislative commission investigating the crude oil exploration "contract violations", which allegedly have been committed by petroleum multinationals in Venezuela.

Nicolas Maduro, president of the National Assembly said the purpose of the oil contracts hearings was to prove "a collection of irregularities such as tax evasion, accumulated non-payment of mandatory royalties and lack of control over the actual pumping from oil wells".

President Hugo Chavez administration claims that foreign oil corporations operating in Venezuela have tax arrears of 3 billion US dollars and royalty arrears of one billion. Venezuela pumps an estimated 2.5 million bpd and is a main supplier of United States.