April 15, 2008 / 6:32 PM / in 10 years

Venezuela approves $9 bln oil windfall profit law

<p>Oil facilities are seen on Lake Maracaibo in Venezuela's western state of Zulia March 1, 2008. REUTERS/Jorge Silva</p>

CARACAS (Reuters) - Venezuela’s parliament passed a law obliging oil companies to give windfall earnings to the leftist government when world prices are above $70 a barrel, a legislator said on Tuesday.

Oil Minister Rafael Ramirez said the new law would bring in an estimated $9 billion annually at today’s prices.

President Hugo Chavez, who has for years squeezed more revenue from oil companies operating in the OPEC nation and nationalized all foreign-run oil fields, wants the funds to be spent immediately on social programs in this election year.

Iroshima Bravo, a member of the parliament’s finance commission, told state television the law had been passed by majority on Tuesday and would take effect this week.

The government will take in about 92 cents for every extra dollar when world prices are above $70 a barrel and then 97 cents when they are above $100 a barrel, his oil minister, Rafael Ramirez told reporters.

“Through the concept of this tax, there’s going to be income around $9 billion. That’s $770 million a month and an average of $150-$200 million a week.” Ramirez said after explaining the law to Congress before it was passed.

World oil prices hit a record above $114 a barrel on Tuesday.

Chavez’s new move against oil companies is part of a worldwide trend where oil-producing nations have sought to extract more revenue from foreign companies who are benefiting from high prices.

Still, oil sector analysts and industry officials have said they fear Venezuela’s law is so tough it could inhibit investment in a country with some of the largest oil reserves outside the Middle East.

Reporting by Enrique Andres Pretel; Writing by Saul Hudson; Editing by Frank Jack Daniel and Marguerita Choy

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