Venezuelan Mayor Seizes Baker Hughes Facilities

(Argus, 8.Nov.2019) — A warehouse and offices owned by US drilling services firm Baker Hughes were seized yesterday by a local mayor in Zulia state for alleged municipal tax evasion.

The takeover of the US company’s installations took place yesterday at 5:30am local time and was enforced by members of the municipal government backed by local police, a PdV western division official told Argus.

The official said PdV was not informed by the local government ahead of the operation.

Orlando Urdaneta, mayor of the Cañada de Urdaneta municipality near Maracaibo, tells Argus he ordered the takeover of Baker Hughes’ local installations because of the US company’s “chronic non-compliance with its municipal tax obligations.”

Baker Hughes did not immediately respond to a request for comment.

Urdaneta apparently ordered the takeover unilaterally without first informing the Zulia state or central government authorities, including the oil ministry. The government’s central tax authority Seniat said the dispute is a local matter.

“We executed an administrative measure that temporarily shuts the installations until Baker Hughes pays all of the municipal taxes it owes Cañada de Urdaneta,” Urdaneta said. “We applied a temporary shutdown measure after exhausting every option for a frank dialogue to resolve the tax delinquency problem.”

He added that other companies such as Halliburton pay municipal taxes on time, but Baker Hughes has refused to resolve the matter.

Urdaneta did not specify how much Baker Hughes allegedly owes in local taxes.

Baker Hughes is among a handful of US oil services companies, along with Chevron, that continue to operate in Venezuela under a temporary sanctions waiver. At the end of October, the US Treasury extended the waiver for the companies to operate in Venezuela to 22 January, almost a year from when the US first imposed oil sanctions on the Opec country.

The Treasury’s Office of Foreign Assets Control (OFAC) this week published additional sanctions guidance that allows US companies/persons to “pay taxes, fees, and import duties to, and purchase or receive permits, licenses, registrations, certifications, and public utility services from, the Government of Venezuela”. Previously it was not explicitly stated that such payments are allowed.

Among the multiple factors behind Venezuela’s sharp decline in oil production, particularly from mature areas such as PdV’s western division, is a lack of oil services, a problem that became more acute when late president Hugo Chavez took over services companies around 2009.

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