Venezuela's state-run oil company will begin paying foreign oil firms in local currency instead of U.S. dollars to bring operations in line with government-imposed currency controls, an official said Wednesday.
Venezuela imposed strict currency controls in early 2003 to halt rampant capital flight. The state oil company Petroleoes de Venezuela, however, had been reimbursing contracted oil firms in U.S. dollars.
Speaking on the sidelines of a forum, Oil Minister Rafael Ramirez said foreign oil firms operating with PDVSA will now be paid in bolivars.
"The (oil) operating agreements, just like any other company ... must ask the central bank for foreign currency," said Ramirez. "No contract can be above the law ... we're not going to pay in dollars anymore."
President Hugo Chavez, who has dismissed claims by some oil firms that their operations have not brought them big profits, announced Sunday that he had ordered a halt to the reimbursement of oil firms in greenbacks.
Venezuela signed 32 operating agreements with foreign and local oil companies in the 1990s, a period when the country had no currency controls in place.
Now, companies will have to register with a state-run currency agency, known as Cadivi, to convert local currency into dollars. The central bank pays Cadivi directly for currency transactions.
During the first quarter of 2005, Ramirez said PDVSA paid out US$890 million (Ђ705.17 million) to companies working under the operating contracts.
Cadivi is notoriously slow in processing dollar requests and demands excessive paperwork, prompting many companies to buy dollars at a more expensive rate on a booming black market. The official exchange rate is 2,150 bolivars per dollar, but one greenback fetches around 2,600 bolivars on the black market.
Private oil firms have come under pressure in Venezuela to pay higher taxes and forfeit control over operations to the government.
Chavez's administration has increased tax rates on heavy crude projects in Venezula's eastern Orinoco oil belt and the 32 operating contracts. In addition, PDVSA has ordered oil companies to convert the operating contracts into PdVSA-controlled joint ventures within six months.
ChevronTexaco, Spain's Repsol, Royal Dutch Shell and Brazil's Petrobras are a few of the 32 companies that were awarded operating contracts in bidding rounds held in the 1990's. Under the contracts, companies operate marginal crude oil fields for a fee.
Venezuela is the world's fifth largest oil exporter and a major supplier of crude to the United States.
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