Energy
State-owned oil company Petróleos de Venezuela (Pdvsa) decided to adjust the system of payment of royalties at a time when the Venezuelan Treasury needs more cash to meet its commitments.

The Organic Law on Hydrocarbons provides that the state-run oil industry can pay royalties in cash or in kind (oil barrels), and although the legal framework allows for both options, Pdvsa's contribution has been generally in cash.

In nearly four months, the Venezuelan oil industry has paid VEB 6.4 billion (USD 2.98 billion) in royalties, according to data provided by the Ministry of Finance. From this amount, VEB 4.97 billion (USD 2.31 billion) has been paid in cash and VEB 1.3 billion (USD 605 million) in kind. Therefore, 20 percent of the contribution to the Treasury has been paid with oil barrels.

The commitments established in agreements between Venezuela and other countries have had effects on the contributions. As a result, the Treasury is collecting less cash.

Through the contribution in kind, Pdvsa has notified the government, in this case the Ministry of Finance, that part of the contribution is made in barrels, which have a value that is recorded in the Ministry's data.

Pdvsa is responsible for selling those volumes of oil to companies with which it has previous agreements. Then, these companies made the payments on overseas accounts of Venezuelan financial entities such as the Venezuelan Development Bank, Bandes.

Meanwhile, Pdvsa has implemented a USD 2.5 billion zero-coupon bond issue to pay down growing debts with service suppliers. Sources said that the financial operation will be private.