Venezuela scaring off oil investors by raising taxes

Gary Park

Venezuela keeps doing favors to Canada’s heavy oil sector — first through strikes and disruptions to its shipments and now by trying to cash in on sky-high oil prices.

In a bid to raise its annual tax revenues by about US$720 million, Venezuela hiked the share of revenue companies must pay to 16.67 percent from 1 percent.

That comes after three years of upheaval in Venezuela’s energy sector that has steered more investors away from the South American country’s heavy oil to Alberta.

The royalty change that was implemented without warning and after-the-fact will likely raise fears among those contemplating investment in Venezuela, said Alberta Energy Minister Murray Smith.

Both Smith and Amir Arif, senior vice president with Friedman Billings Ramsey, said the political stability and regulated environment now give Alberta an edge over its only rival in the oil sands sector.

Oil sands developers in Alberta pay 1 percent of gross revenue until they cover their capital costs, after which the royalties climb to 25 percent.

Of the foreign companies with operations in Venezuela, ExxonMobil, Total, Shell and ConocoPhillips are all key players in the Alberta oil sands.