WATCHING GOVERNMENT VENEZUELA'S WATERSHED ELECTION
When Venezuelans vote for a new president Dec. 5, they also will chart the country's approach toward foreign investment in Venezuela's petroleum sector, notably with state oil company Petroleos de Venezuela SA.
Pdvsa is crucial to the Venezuelan economy. Oil accounted for 79% of the country's total exports in 1992, and Pdvsa had consolidated sales of $21.4 billion in 1992, making it one of the world's largest oil companies.
Not only is Pdvsa the backbone of the Venezuelan economy, it also is the country's largest taxpayer, with a tax burden which has exceeded 80% of operating profits.
POLITICAL INTERFERENCE
Not surprisingly, Pdvsa has been subjected to various degrees of political interference since Venezuela's oil industry was nationalized in 1976.
Carrying heavy debt in recent years because of the onerous tax take, Pdvsa has been faced with either greatly reducing a number of ambitious oil projects or seeking foreign participation on a large scale.
It opted for both, and opened the door for foreign investment in exploration and production, refining, petrochemicals, coal, and other areas.
As a result, companies such as Exxon, Shell, Mitsubishi, Conoco, and Total have joined Pdvsa in developing large scale projects in LNG and upgrading of heavy/extra heavy Venezuelan crudes.
Ex-President Rafael Caldera, 77, leads the field of eighteen presidential candidates. An independent, he supports private investment in major Pdvsa projects but says Venezuelan investors should have priority over foreigners.
Oilmen view this as nationalistic rhetoric, since the pool of domestic investment capital simply does not approach the multibillion dollar scale of Pdvsa's planned projects.
Caldera, who was president during 1969-74, has questioned recent exceptions made in Venezuela's income tax law to favor foreign investors in major joint ventures.
Congress approved the exceptions, which allow international investors in the projects to pay the maximum corporate tax rate of 30% rather than the higher rates that Pdvsa and its oil operating units pay.
Also, Caldera was vehemently opposed to allowing foreign companies to invest in oil and gas when the Oil Industry Nationalization Bill was debated in 1975.
Although it is unlikely Venezuela will stop seeking foreign investment if Caldera wins, his current positions and past record have raised some concerns.
OTHER LEADING CANDIDATE
The second ranked candidate, Oswaldo Alvarez Paz, 50, firmly defends the need to continue attracting large scale foreign investment in the oil sector.
Alvarez is a former governor of Venezuela's most important oil producing state, Zulia, which encompasses the Lake Maracaibo fields.
He is the candidate of the Christian Democrat Copei party, which Caldera founded in the 1940s but later abandoned.
Although either Caldera or Alvarez are likely to win, the next two most popular candidates also favor foreign investment in Venezuelan oil industry.
Copyright 1993 Oil & Gas Journal. All Rights Reserved.