Private Oil Cos. Face Taxes in Venezuela.

Venezuela's oil minister said Thursday that private oil firms will have to sign new contracts to comply with legislation requiring that Venezuela's state-run oil company has a majority stake in all oil production projects.

Rafael Ramirez, a close ally of President Hugo Chavez who also serves as the president of Petroleos de Venezuela S.A., or PDVSA, told a press conference that new contracts to replace 32 existing ones should be inked within six months.

Ramirez said companies operating under current contracts - both national and foreign - produce 500,000 barrels of oil a day in oil-rich Venezuela and they are not paying enough in income taxes.

His statements came a day after Chavez said the government may charge private oil companies taxes on operations that have declared losses in recent years amid an ongoing investigation by the country's tax agency.

Venezuela signed dozens of operating service agreements in the 1990s with companies such as ChevronTexaco Corp., BP Plc, France's Total SA, Brazil's Petrobras, Spain's Repsol YPF, Royal Dutch Shell and the China National Petroleum Corp.

Under the contracts, companies operate marginal fields for a fee.

Private companies produce about 40 percent of Venezuela's oil output, or 1.1 million barrels a day.

Venezuela's tax agency, Seniat, began an investigation this month of private oil companies that have declared losses and have not paid income tax to Venezuela's government in recent years.

Venezuela is the world's No. 5 oil exporter and officials say it produces 3 million barrels of crude a day. But analysts say that production is closer to 2.6 million.

[Source: AP by Forbes, 14Apr05]

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