Venezuela’s government will maintain authority to determine royalty and tax rates for international and private investors in petroleum and natural gas ventures on an individual project basis, according to draft regulations for new hydrocarbons legislation reviewed by Reuters on Saturday.
The legislation, which became law in January, established a royalty ceiling of 30% and introduced a maximum integrated hydrocarbons tax of 15%. Industry analysts had expected the accompanying regulations would outline the precise rates below those limits that international and private partners would be required to pay.
However, the draft document indicates that the Ministry of Hydrocarbons will examine each operating company’s business plan to establish the particular tax and royalty rates.
Venezuela is working to draw foreign investment and reconstruct its economy after the U.S. removed President Nicolas Maduro at the beginning of the year. Under acting President Delcy Rodriguez, the draft framework formally concludes decades of state control by permitting private companies to secure licenses for heavy crude oil processing, refining and international trading — operations that previously only state-owned PDVSA could conduct.
The 63-page regulation still requires publication in the Official Gazette before becoming effective.
Under the new legal structure, the National Assembly no longer approves energy joint ventures.
Rather, the Ministry of Hydrocarbons possesses nearly complete power to execute contracts and alter their conditions, including taxes and royalties. Oil analysts and economists have condemned the ministry’s extensive discretion as a possible obstacle to foreign investors who fear the government could make one-sided modifications to negotiated terms.
The establishment of the integrated tax generated doubt about whether Caracas planned to substantially lower the state’s share, which has traditionally been among the highest in Latin America.
