Natural Resource Wealth Belongs to All Citizens
Venezuela raises oil royalty privilege tax
If a corporation wants to take oil away from Venezuela, it must reimburse the people of Venezuela. That seems like a fair idea, much like the system used in Alaska.
Here are portions of an unfriendly report from the BBC.
by Iain Bruce
Venezuela has announced that it is increasing the royalties paid by foreign oil companies from 1% to 16.6%.
President Hugo Chavez made the announcement in his weekly television address, with the oil port of Puerto de la Cruz as his backdrop.
The surprise measure will affect all foreign companies offering joint ventures in Venezuela's Orinoco heavy crude belt.
During his address on Sunday, Mr Chavez said: "We are no longer going to give our oil away for reasons that no longer exist, if they ever did."
Venezuelan Energy Minister Rafael Ramirez told the BBC that no special notice had been given to the oil companies concerned -- which include Exxon Mobil, Total Fina Elf and Conoco Phillips. They were all treated equally.
Ramirez explained that the increase was entirely legal. The 1% level of royalties was granted by the previous Venezuelan government in the mid-1990s as a special measure to attract foreign investment.
But the minister says that now international prices have risen and productivity in these oil fields is three times higher than expected, the Venezuelan government has every right to return royalties to their earlier levels.
He says he does not expect future dealings with what he called serious oil companies to be affected.
The Progress Report observes -- Venezuela should auction off oil drilling leases, and let the oil companies decide for themselves how much to pay. Then the "tax" will be seen for what it really is -- just a user fee -- and snide BBC reporters will have to admit that it's simply a move toward pricing a special privilege at fair market value.
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