The big national companies and the big firms that, in an independent move from the Venezuelan-American Chamber (VenAmCham), founded the Venezuelan Association of Hydrocarbons a year ago, have announced their purpose of making great investments in the oil and gas sectors.

And although its spokesman, Luis Xavier Grisanti, executive chairman of this organization, points out that several conditions are still necessary to carry out that purpose, there is no sign of criticism in his comments, about the conditions established in the Organic Law of Hydrocarbons and in the Organic Law of Gas Hydrocarbons.

Nevertheless, it is the wish of the AVHI (Venezuelan Association for Hydrocarbons) that the Ministry of Energy and Hydrocarbons (MEM) clearly specifies the conditions under which the new projects for oil and gas, which are part of the 2004-2009 PDVSA Business Plan, will be subscribed.

The opportunities for new business in the oil and gas sectors, linked to the Venezuelan Association of Hydrocarbons, are nearly 14.5 billion $

But these investments, which could be made effective from the current year until 2008, depend on several specific points that, according to Grisanti; the MEM, as well as the state corporation should define. And although this businessman acknowledges that the country risk has dropped by 50%, he warns that it is necessary that the sanctioned laws; such as the of Investment Protection Law, approved in 1999; and the Regulations of the Organic Law of Hydrocarbons come into effect.

According to the AVHI, the allocation of the total amount of resources in the oil and gas sectors could be done between 2004 and 2008, as follows:

– Strategic associations in the Orinoco Belt: 900 million $
– Operative Agreements: 2.2 billion $
– Associations under the modality of shared profits: 940 million$.

Prospective distribution for the gas sector:

– On-land License for gas exploitation in the Barrancas area: 400 million $
– On-land License for gas exploitation in the Yucal Placer area:474 million $
– Mariscal Sucre Natural project of gas exploitation in the sea: 2.7 billion $
– Natural gas exploration and exploitation projects in the Delta platform (blocks 2,3, and4): 3.8 billion $
– Gran Mariscal de Ayacucho industrial complex: 2.5 billion $.

More Legal Incentives

Grisanti has stressed the need for the subscription of agreements, between the Executive and companies, which contemplate fiscal incentives provided in the Income Tax Law, in the Organic Law of Hydrocarbons, and in the Gas Hydrocarbons Law . He also referred to the importance of improving communication channels between the with Pdvsa, with one of its subsidiaries; Corporación Venezolana de Petróleo, and with the Minister of Energy and Mining himself.

Energy and Mining Minister Ramírez indicated that “several discussions with AVHI, that are at an advanced stage” are currently being held.

He pointed out that “we have told these companies, that participated under different conditions and with another legal framework in several negotiations resulting in the Operative Agreements and the Strategic Associations of the Orinoco Belt, that there is now a new legal framework; and we have explained to them that in Venezuela projects like those will not be carried out again.”.

According to Ramírez- we have objected to such projects, since they were subscribed under unfavorable conditions for the country: they paid 1% royalties, were not required to make income tax payments, and additionally, were granted discounts. Now, the new businesses in the oil sector must pay a 30% royalty and fulfill all their the tax obligations.

At present, the AVHI companies represent a total amount of 25 billion $ in investments -between 1992 and 2003- through which there has been a yield of a million barrels of crude oil per day. Furthermore, these investments, represent nearly 8% of the Gross Domestic Product, and altogether generate 13,000 direct jobs and 32,000 indirect.

Rodrigo Morazán