By Brian Ellsworth
CARACAS, Venezuela (Reuters): Venezuela on Friday slapped the largest tax bill in the nation's history on an oil project led by ConocoPhillips, the lone holdout in President Hugo Chavez's oil nationalization crusade.
The move comes only days after the nation's energy minister said Venezuela is in "conflict" with Conoco over its refusal to sign an accord recognizing the OPEC nation's takeover of four multibillion dollar Orinoco heavy crude projects on May 1.
The Seniat tax authority said in a statement it had hit the Petrozuata oil project, 50.1 percent owned by ConocoPhillips, with a tax claim of more than $465 million. It also slapped a $79.5 million claim on the Hamaca project, 40 percent owned by ConocoPhillips and 30 percent owned by Chevron, which has been the most optimistic of the Orinoco companies about reaching a takeover deal.
ConocoPhillips did not immediately respond to requests for comment from either its Venezuelan or US headquarters.
Venezuelan state oil company PDVSA, which took over operations of the projects this month, is preparing to take at least 60 percent ownership of all four. "This is a way to discount as much as possible the cost of PDVSA's increasing share of the projects," said Roger Tissot, an analyst with PFC Energy in Washington.
The operations can turn around 600,000 barrels of tar-like Orinoco crude into valuable synthetic oil and have an estimated value between $25 and $30 billion.
COMPENSATION CONFLICT
Compensation for lost stake in the projects remains the thorniest issue in the Orinoco takeovers, particularly since Energy Minister Rafael Ramirez has said Venezuela does not expect to make cash payments to the Orinoco partners.
The Chavez government has given companies until June 26 to decide if they will continue as minority partners in the projects, but some of the companies may take Venezuela to international arbitration for contract violation. Chavez, a former soldier and ally of Cuba's Fidel Castro, has been at the vanguard of a region-wide "resource nationalism" campaign to boost government revenue from energy, mining and other natural resources.
PDVSA is a minority partner in the four Orinoco projects, which also include investment from Exxon Mobil, Britain's BP Plc, France's Total, and Norway's Statoil. The Seniat has issued back tax bills totaling hundreds of millions of dollars to private oil companies operating in Venezuela, the No. 4 exporter of oil to the United States.
The government used the tax assessments as bargaining tools during takeover of 32 subcontracting agreements that in 2006 were converted to state-majority joint ventures. In many of those cases, companies were able to pay considerably less than the amounts the Seniat originally charged them.
"It's not an accident that the government chose these two particular projects," said Patrick Esteruelas, an analyst with the Eurasia Group in New York. "The government essentially has upped the costs of Conoco's decision."
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