Venezuela raises oil drilling tax

Venezuela has announced that it is increasing the royalties paid by foreign oil companies from 1% to 16.6%.

President Hugo Chavez said it marked the second and true phase of the nationalisation of the country's oil.

He made the announcement in his weekly television address, with the oil port of Puerto de la Cruz as his backdrop.

The surprise measure will affect all foreign companies offering joint ventures in Venezuela's Orinoco heavy crude belt.

During his address on Sunday, Mr Chavez said: "We are no longer going to give our oil away for reasons that no longer exist, if they ever did."

'Legitimate move'

Venezuelan Energy Minister Rafael Ramirez told the BBC that no warning had been given to the oil companies concerned - which include Exxon Mobil, Total Fina Elf and Conoco Phillips.

But he insisted that the increase was entirely legal.

The 1% level of royalties was granted by the previous Venezuelan government in the mid-1990s as a special measure to attract foreign investment.

But the minister insists that now international prices have risen and productivity in these oil fields is three times higher than expected, the Venezuelan government has every right to return royalties to their earlier levels.

He says he does not expect future dealings with what he called serious oil companies to be affected.