May 16 (Reuters) – The Venezuelan government will retain power to set royalty and tax rates for private and foreign investors in oil and gas projects on a project-by-project basis under draft regulations of a new hydrocarbons law seen by Reuters on Saturday.
The law passed in January established a royalty cap of 30% and a new maximum integrated hydrocarbons tax of 15%. Industry experts had anticipated the accompanying regulations would specify the exact rates below those caps that private and foreign partners would pay.
Instead, the draft document states that the Ministry of Hydrocarbons will review each operating company’s business plan to determine the specific tax and royalty rates.
Venezuela is attempting to attract foreign capital and rebuild its economy following the U.S. removal of President Nicolas Maduro at the start of the year. Under acting President Delcy Rodriguez, the draft framework officially ends decades of state monopoly by allowing private companies to obtain licenses for heavy crude oil processing, refining and international trading — activities that previously only state-owned PDVSA could perform.
The 63-page regulation must still be published in the Official Gazette to take effect.
Under the new legal framework, the National Assembly no longer approves the energy joint ventures.
Instead, the Ministry of Hydrocarbons holds almost complete authority to sign contracts and modify their terms, including taxes and royalties. Oil experts and economists have criticized the ministry’s wide latitude as a potential deterrent to foreign investors who worry the government could make unilateral changes to agreed terms.
The introduction of the integrated tax raised skepticism over whether Caracas intended to reduce significantly the state’s take, which has historically been one of the highest in Latin America.
(Reporting by Reuters Staff; Writing by Natalia Siniawski; Editing by Cynthia Osterman)
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