Chavez Increasing Oil Royalties 15% Exxon Mobil Pissed

[chlamor]

Caracas, Venezuela, February 28, 2005—Exxon Mobil, the world’s largest corporation, is considering arbitration to challenge Venezuela’s recent increase of oil royalties from 1% to 16.66%, according to a report by the Reuters news agency. The increased royalties are expected to raise oil revenue for the Venezuelan state from $46 million to over $750 million.

Last October the Chavez government decided to raise oil royalties, the percentage of oil an oil company is required to give to the Venezuelan state. According to government spokespersons at the time, the royalty increase was justified because, first, the projects for which the 1% royalty had been negotiated had matured and, second, because the price of oil had reached historical heights that made such an increase affordable.

<snip>

Last week Exxon Mobil said that it was interested in meeting with PDVSA President and Oil and Energy Minister Rafael Ramirez, but Ramirez turned down the request, saying that the decision to raise royalties would not be changed.

Earlier in the month, the other oil companies involved in similar projects which had their royalties raised, said that they would not challenge the royalty increase. Reuters reports that analysts speculate that the reason Exxon Mobil is challenging the increase is because it has less to lose than the other companies, since its Venezuelan project represents only a small fraction of its total worldwide operations.

http://venezuelanalysis.com/news.php?newsno=1527

[Skink]

1. Arbitration or assasination?

You decide.

[seventythree]

11. Yah, wasn't it an Exxon tanker named for Condi?

me thinks Chavez is walking on egg shells -- didn't he get a clue the last time?

[oblivious]

2. ONE PER CENT? That's all they've been paying?

What kind of a government would negotiate that kind of deal? This can't be true. One per cent????? Do they have a tax as well? 1%.

[daleo]

8. Probably the 1% only referred to certain projects.

We are going through a similar process in Alberta, Canada - the most recent tar sands and heavy oil projects were given sweetheart royalty deals to get them off the ground when investment in the oil industry was lagging (80's and 90's). Typically, the deal would be something like "rate X until the investment capital and some specific profit is realized, they X+y"). From 1% to 15% seems about right in the Alberta context for some of the unconventional sources as well.

Now these projects are maturing and should be coming under much higher royalty structures. Naturally, the oil companies are crying poverty and giving tortured arguments as to why the rates shouldn't increase, as they had agreed earlier. There is a lot of money at stake here (billions), and there. Chavez will come under incredible pressure over this. Another coup attempt or assassination seems quite probable. Our politicians (Alberta) needn't worry, as they can be depended on to buckle under to the big oil companies.

[Selatius]

9. The 1% royalty came about gradually

Decades ago it actually was higher, but years of corruption and bribery managed to whittle it down to 1%. Apparently, the politicians of the time did not feel that the oil belonged to Venezuelans, just ExxonMobil and other oil giants.

[autorank]

3. Does anyone here remember United Fruit Co. in Central America?

[Kathy in Cambridge]

6. Did you read "Bitter Fruit"?

http://www.amazon.com/exec/obidos/ASIN/0674075900/102-1972569-1888921

"Bitter Fruit recounts in telling detail the CIA operation to overthrow the democratically elected government of Jacobo Arbenz of Guatemala in 1954. The 1982 book has become a classic, a textbook case study of Cold War meddling that succeeded only to condemn Guatemala to decades of military dictatorship. The authors make extensive use of U.S. government publications and documents, as well as interviews with former CIA and other officials. The Harvard edition includes a powerful new introduction by historian John Coatsworth, Director of the David Rockefeller Center for Latin American Studies; an insightful prologue by Richard Nuccio, former State Department official who revealed recent evidence of CIA misconduct in Guatemala to Congress; and a compelling afterword by coauthor Stephen Kinzer, now Istanbul bureau chief for the New York Times, summarizing developments that led from the 1954 coup to the peace accords that ended Guatemala's civil strife forty years later."

[autorank]

7. If this were Jeopardy, you'd win big. That's right for $800

And why in the world would we invade a democracy to prop up a stupid fruit company. This story really depresses me because it really tars Eisenhower. You think he'd have stepped in and said, enough already. I think Henry Cabot Lodge was either a United Fruit shareholder or somehow connected (so much for liberal Republicans). Thanks for the book reference. That looks excellent.

[illflem]

4. Why should Exxon Mobil even care?

they'll just make up the difference by raising the price at the pump

[chlamor]

5. They Care

Because they want it ALL. A brown skinned man telling them NO. This is a bad example.


VIVA CHAVEZ!

[slay]

10. Me thinks the 16.66 is a reference to Bush being the Anti-Christ

Christ was supposedly an advocate for the poor. Bush is an advocate for soulless corporations. He is indeed the opposite of Christ - an Anti-Christ.

http://www.falloutshelternews.com/BushAntiChrist.htm

http://web.archive.org/web/20030602200444/http://www.geocities.com/trebor_92627/Bush.htm

[AirAmFan]

12. This is exactly the kind of situation that leads to INVASION

by the US Government or its proxy states when 'national oil companies' won't provide 'access to oil reserves' at 'acceptable' terms. In precisely the same way commercial disputes over heroin and cocaine distribution are settled by violence on city streetcorners, rights and terms for serving the world's petroleum addicts lead to direct US invasions and warfare through proxy states. Dick Cheney and other decisionmakers must feel strongly that US 'energy security policy' would be served much better by 'privatization' of 'concessions' for oil. I just learned these codewords for impending US aggression today. Try googling some of them.

I googled 'access to oil reserves' and found a remarkable article at http://www.fpif.org/pdf/reports/PRoil.pdf . On page 4, there is a table showing that all 8 of the top countries listed by oil reserves in 2000 had 'national oil companies':

"Leading Oil Companies, 2000

Country and Oil Reserves (billions of barrels)

Saudi Aramco 261.8
INOC (Iraq) 112.5
KPC (Kuwait) 96.5

NIOC (Iran) 89.7
PDV (Venezuela) 77.7
ADNOC (United Arab Emirates) 53.8

Pemex (Mexico) 28.3
NOC (Libya) 23.6

...

WORLD 1,046.2

Source: Adapted from Energy Intelligence Group"

The current WH seems to be going after all troublesome countries on this list, in order by size of reserves. Venezuela, with 8 percent of proven world oil reserves, is fifth on this list, just behind Iran's 9 percent. We're already occupying country number two directly.

See also a discussion thread for this Michael Renner article at http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x1653776

[Stop_the_War]

13. I LOVE CHAVEZ

[PROGRESSIVE1]

14. good for him!