Venezuela to Tighten Terms on Oil Fields

MSN Money - Associated Press Business News: Venezuela to Tighten Terms on Oil Fields: "CARACAS, Venezuela (AP) - Venezuela plans to tighten the tax terms on 32 privately operated oil fields as it rewrites contracts that were signed in the 1990s, an executive at Venezuela's state-run oil company said Wednesday.

If royalty and income taxes payments are less than 50 percent of total revenue in any given year, companies will have to pay the difference, said Eulogio Del Pino, director of Petroleos de Venezuela SA, or PDVSA.

Companies operating the 32 fields pump approximately 500,00 barrels a day, roughly a fifth of the Venezuela's total petroleum production.

'The state will never receive less than 50 percent of gross revenue,' Del Pino said.

Companies operating the fields currently pay a 50 percent income tax rate and a 30 percent royalty rate after the oil ministry hiked taxes last year.

The new tax clause is part of an effort by President Hugo Chavez to assert greater control over Venezuela's vast oil reserves.

Private oil firms are currently negotiating with PDVSA to form joint ventures in which the state company will hold majority stakes and control management decisions. These firms currently pump oil under contract for PDVSA, but last year they signed letters of intent to become minority partners with the state firm in the joint ventures.

ExxonMobil Corp. is the only firm that has refused the terms, preferring to sell its stake in one of the fields to Spanish-Argentine oil giant Repsol.

PDVSA plans to deliver the terms of the new ventures, or so-called 'mixed companies,' for approval this year to a Venezuelan Congress dominated by allies of Chavez.

Following congressional approval, Del Pino said the 32 companies will undergo a series of mergers in an effort to reduce costs.

Venezuela is the world's fifth-largest exporter of oil. It has the largest proven oil reserves outside of the Mideast and the second-largest gas reserves in the Western Hemisphere.

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