Oil Production and Conditions Affecting Potential Future U.S. Investment
NSIAD-92-73: Published: Dec 12, 1991. Publicly Released: Jan 15, 1992.
- Full Report:
Pursuant to a congressional request, GAO reviewed Venezuela's petroleum industry and conditions affecting potential future U.S. investment in Venezuela's petroleum sector, focusing on: (1) recent increases in Venezuelan oil production and the primary factors affecting continued increases through 1996; (2) Venezuela's recent reforms to encourage foreign and private petroleum-related joint ventures and U.S. petroleum companies' response to those reforms; and (3) U.S. efforts to support Venezuela's energy sector.
GAO found that: (1) Venezuela's oil production peaked in 1970, declined through 1985, and increased by about 21 percent through 1990; (2) the primary factors affecting continued increases in oil production through 1996 include a Venezuelan government-owned oil company's ability to obtain investment capital, the cost of producing and refining heavy and extra-heavy crude oil, and the Organization of Petroleum Exporting Countries' production level quotas; (3) to encourage foreign and private investment in petroleum-related joint ventures, Venezuela created an office to negotiate joint ventures and reduced oil production and refining taxes, but those reforms have not succeeded in attracting U.S investment in oil exploration, production, or refining in Venezuela; (4) U.S petroleum companies cited such reasons for their reluctance to invest in Venezuela as an absence of clear guidance, high tax rates, the requirement for Venezuelan congressional authorization of foreign investments, the lack of a bilateral tax treaty, uncertain security over foreign assets, and the absence of effective judicial protection against Venezuelan government actions; and (5) the United States has taken such actions to support Venezuela's energy sector as granting credit guarantees for U.S.-petroleum related exports, partially funding a feasibility study for refinery construction, promoting petroleum-related trade seminars and shows, signing a bilateral agreement to establish more routine trade and investment consultations, and holding bilateral consultations.