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Bureau of Mines / Minerals yearbook: Area reports: international 1971
Year 1971, Volume 3 (1971)

Koelling, Gordon W.
Venezuela,   pp. 887-898 PDF (1.3 MB)

Page 887

  887The Mineral Industry of Venezuela 
By Gordon W. Kodlling1 
 The value of Venezuela's crude minerals output was adversely effected in
1971 by the decreased production of crude oil and iron ore. Approximately
94 percent of crude minerals output value was accounted for by the petroleum
industry (including natural gas) which also was responsible for approximately
25 percent of gross domestic product (GDP), provided about 67 percent of
the Government's ordinary revenues, and was responsible for over 90 percent
of the country's total export receipts. About 5 percent of the value of Venezuela's
crude minerals output was accounted for by iron ore. 
 Despite a 4 percent decline in crude oil output, Venezuela remained the
world's third leading petroleum exporting country behind Saudi Arabia and
Iran and retained fifth place among the world's crude oil producing nations.
This drop in production reflected some of the basic problems of the Venezuelan
petroleum industry. Reserves of crude oil declined for the sixth consecutive
year and production costs remained high in comparison with those in other
major petroleum exporting countries. In addition, rapidly declining tanker
rates further eroded the advantage of Venezuela's geographic proximity to
consumers in the Western Hemisphere. A number of actions taken by the Government
to increase its income from and its control of the petroleum industry also
resulted in a rise in the price of Venezuelan petroleum exports and tended
to make additional investment in exploratory activity less attractive to
most private companies. 
 In accordance with the provisions of the Law for Partial Reform of the Income
Tax Law enacted in December 1970, the Venezuelan Government revised the price
of petroleum exports to be used for tax calculations (these arbitrarily determined
prices are called Tax Reference Values) during 1971. These price revisions
raised the tax 
price of petroleum products and crudes of differing gravities by amounts
varying from 38.5 to 92.0 U.S. cents per barrel. A decree issued near the
end of December 1971, further increased the Tax Reference Values of crudes
and various petroleum products by amounts ranging from 9 to 84 U.S. cents
per barrel. 
 The above decree also established petroleum export controls which are to
operate through a penalty clause that will apply whenever a company's exports
during any quarter of 1972 fall more than 2 percent below that firm's shipments
during the corresponding quarter of 1970. Penalties ranging from 1 to 10
percent of Tax RefeiTence Value are to be assessed against all petroleum
exports of a company in any quarter during which its total shipments fall
below the specified minimum with the maximum penalty rate applying in case
of shortfalls exceeding 8.9 percent. Penalties are also to be assessed when
any firm's quarterly export quantities exceed those of the corresponding
quarter of 1970 by more than 4 percent. However, such penalties are to apply
only to the incremental shipments during the quarter rather than to the total
quantity exported. 
In July 1971, the Law Concerning Property Subject to Reversion in Hydrocarbons
Concessions was signed by the President. This law declares that essentially
all facilities for exploration, production, refining, or transportation within
petroleum concessions, or existing for the fulfillment of the obligations
derived from such concessions, are to revert to the Government upon the expiration
of petroleum concession agreements. It also requires the maintenance of a
guaranty fund to which concessionaires are to make contributions consisting
of up to 10 percent of the cost accepted by the Income Tax Administration
for the depre1 Geographer, Division of Fossil Fuels. 

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