Venezuela, the oil-rich South American country, has plans to expand its petrochem sector. The country is expected to announce its new investment plans for the petrochemicals industry in June, for which it must increase natural gas output. Despite the keenness for expansion plans, Venezuela hiked royalties on heavy oil upgrading projects in the Orinoco tar belt to 16.6% from a preferential 1%. Exxon was the only of five companies operating in the area to publicly challenge the move, leading to speculation the company would halt further business deals in Venezuela.
Despite these hurdles, Exxon Mobil has decided to go ahead with its petrochem venture in Venezuela. The JV will be a 50:50 partnership between Exxon and Pequiven, to build a US$3 billion (euro2.4 billion), anticipated to start up in 2008 to 2010. This plant will be built near the Jose oil upgrading project in eastern Venezuela, where many oil refineries of the nation are located. Exxon is interested in the project despite a surprise royalty tax hike imposed last year on the company's Cerro Negro heavy crude upgrading project, which turns heavy crude into more marketable synthetic oil.