Shell Evaluates Venezuela Venture Under New Windfall Oil Tax Official
Venezuela -(Dow Jones)- Royal Dutch Shell PLC (RDSA) will have to incorporate Venezuela’s new windfall oil price tax into its evaluation of a plan to develop the Urdaneta Lago area in Lake Maracaibo, the president of the company’s local unit said late Monday.
“We’re including this as one more factor to take into consideration. Obviously the project has to make economic sense as well, and we’re looking at this right now,” Luis Prado, President of Shell in Venezuela, told Dow Jones Newswires on the sidelines of the 19th Latin American Petroleum Show in Maracaibo.
He declined to give specifics of what, if any, talks the company is having with state oil company Petroleos de Venezuela SA, or the oil ministry regarding the recently approved tax. Prado gave no timeline for a decision on Urdaneta Lago´s development.
In late January PdVSA and Shell signed a memorandum of understanding to perform a study for the development of Urdaneta Lago, an area just north of the Urdaneta Oeste field, a block controlled by Petroregional del Lago, a joint venture between both companies. PdVSA controls a 60% share of Petroregional, and Shell holds the rest.
Three months later, on April 15th, Venezuelan lawmakers approved the new tax meant to capture a larger share of the windfall gains derived from exporting crude under record oil prices. Based on the new tax law, the state will charge a 50% tax on the difference between the sale price of a barrel of oil and a $70 price of Brent crude. The tax becomes effective once the price of Brent exceeds $70 a barrel. When the Brent price surges past $100 a barrel, that same tax rate jumps to 60%.
So far the state oil company has reportedly paid $300 million a week, or $2.7 billion as of June 12 as its share of the new levy. It’s unclear how soon foreign companies will have to pay their part.
Some foreign oil company executives argue in private, however, that under Venezuelan law only PdVSA has the legal ability to export crude so foreign partners shouldn´t be subject to the tax. Oil Minister Rafael Ramirez has said that, although foreign companies don´t export crude directly, PdVSA does that for them so they will be subject to the tax.
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