[From OFFICIAL GAZETTE OF THE BOLIVARIAN REPUBLIC OF VENEZUELA - Caracas, June 18, 2009 - No. 39.203]
NATIONAL ASSEMBLY
THE NATIONAL ASSEMBLY
OF THE BOLIVARIAN REPUBLIC OF VENEZUELA DECREES
the following,
ORGANIC LAW FOR THE DEVELOPMENT OF PETROCHEMICAL ACTIVITIES
CHAPTER 1
FUNDAMENTAL PROVISIONS
Objective of the Law
Article 1. This law is intended to regulate petrochemical activities carried out in this country, including those industrial activities which physically or chemically transform raw materials based on hydrocarbons gases, hydrocarbons liquids and/or mineral substances utilized as supplies for these activities, whether alone or mixed or in combination with other substances and raw materials. This Law also governs the intermediate products that are derived from such products and are of a different physical-chemical nature and of greater value added, as determined under this Law and its Regulations.
Exception
Article 2. The provisions of this Law do not apply to the matters regulated by the Organic Hydrocarbons Law and the Organic Gas Hydrocarbons Law.
Petrochemical Activities
Article 3. Petrochemical activities are understood as the transformation of initial hydrocarbon- derived petrochemical products, obtained through the separation, purification, conversion and combination thereof through physical and chemical methods, and the transformation of the products obtained in subsequent, intermediate or final industrial processes.
Definitions Article 4. For the purpose of this Law:
1. Basic hydrocarbon components: Means naphthas, methane, ethane, propane, butane, pentane or any mixture or combination of two or more of the foregoing substances or any others specified by regulation.
2. Basic Petrochemistry: Means the industrial processes related to the chemical or physical transformation of the basic components of hydrocarbons that involve a
molecular change, understood as the products obtained from hydrocarbons that have a defined chemical formula.
3. Intermediate Petrochemistry: Means the industrial processes related to the chemical and physical transformation of products obtained from Basic Petrochemistry.
Reserved for the State
Article 5. The basic and intermediate petrochemical activity is reserved for the State, as well as the works, assets and facilities required for its operation. This reserve will be exercised directly by the National Executive or through companies of its exclusive ownership. In can also be exercised by the State through Mixed Companies in which it has decision control and a participation of not less than fifty percent (50%) of the capital stock.
Mixed Companies will be subject to the prior authorization of the National Assembly, to which effect the National Executive, acting through the Ministry of the People’s Power competent for Energy and Oil Matters, will inform the National Assembly of the pertinent circumstances and conditions.
Reservation of actions
Article 6. For reasons of economic sovereignty, policy and national strategy, the State will hold all shares of Petroquímica de Venezuela, S.A. or any successor entity created expressly for the operation of the petrochemical industry.
CHAPTER II GENERAL PROVISIONS
Public Utility and Strategic Character
Article 7. The conduct of the activities contemplated under this Law, and the assets necessary to that effect, are declared to be of public utility, social interest, and strategic nature.
Principles of Application
Article 8. The activities regulated herein will be performed in accordance with the principles of rationality, reliability of supply, efficiency, quality, equity, preservation of natural resources and of the environment, territorial structuring, endogenous and sustainable development, and promotion of cooperative, social and collective participation, with the aim of strengthening the productive sector of the people and socialism. To this end, the activities regulated under this Law will be promoted in order to strengthen the agricultural and industrial productive sector and technological development, so as to further industrialization and transformation of the raw materials they produce.
Competence
Article 9. The National Executive, acting through the Ministry of People’s Power competent in Energy and Oil Matters, will have the authority to lay down, regulate and follow up the policies, and to plan, oversee, inspect, and supervise the activities regulated by the this Law and its Regulations.
Applicable Legislation
Article 10. Petroquímica de Venezuela, S.A. and its affiliated companies will be governed by this Law and its Regulations, by their own by-laws, by the provisions issued by the National Executive, acting through the Ministry of the People’s Power competent in Energy and Oil Matters, and by the applicable rules of public and common law.
Socialist Productive Development
Article 11. The National Executive will take such actions as will encourage the participation of the people in order to create and strengthen the socialist productive sectors for the consolidation and creation of companies that develop or carry out the activities contemplated in this Law, along with those actions necessary so that the goods and services of local origin participate in the best possible conditions in the performance of such activities.
Local Market Supply Policies
Article 12. The National Executive, acting through the Ministry of the People’s Power competent in Energy and Oil Matters, will dictate policies for the supply of the local market and the special conditions that may be agreed upon with the productive sector, prioritizing the supply of the internal market and the development of State-owned and socialist companies.
Obligation to Provide Information
Article 13. Those who engage in the activities contemplated in this Law are required to provide to the National Executive, through the Ministry of the People’s Power competent in Energy and Oil Matters, the information it requests in connection with the performed activities.
The competent agency will keep confidential all information provided, when the interested party shall so request and when it is forthcoming.
Creation of Special Areas
Article 14. The National Executive may create by Decree special zones regarding economic, tax, scientific and technological matters for the development of projects contemplated in this Law, granting to this effect such benefits as it deems advisable.
The creation decrees must determine with the greatest precision the boundaries of the affected zones and the agencies responsible for their administration or management; and the preparation of the respective plan will be ordered, which will establish the guidelines, directives and policies concerning the administration of the relevant areas, and the guidance for the assignment of uses and permitted activities.
Supply of Initial Petrochemical Products
Article 15. In accordance with instructions given by the National Executive, acting through the Ministry of the People’s Power competent in Energy and Oil Matters, companies operating refineries and plants that process hydrocarbons will supply companies engaged in the activities reserved in this Law with those initial petrochemical products that are required in order to carry out the activities.
CHAPTER III MIXED COMPANIES
Authorizations
Article 16. The formation of mixed companies to conduct the activities contemplated in this Law will require authorization from the National Executive, acting through the Ministry of the People’s Power competent in Energy and Oil Matters. Mixed companies will be ruled by this Law, will be formed in accordance with the provisions of Article 5 hereof, and must satisfy the conditions set forth in Article 17. This authorization will be granted in order to guarantee compliance with the technical and operational rules applicable to the construction and development projects for petrochemical activities, as the case may be, and must be related to projects directed towards the development of national downstream industries. Similarly, authorization must be obtained from the National Executive, acting through the Ministry of the People’s Power competent in Energy and Oil Matters, in order to amend the object of such mixed companies as well as to merge, associate, dissolve, liquidate or contribute the capital stock of said mixed companies to other entities.
Requirements
Article 17. The conditions referred to in Article 16 must satisfy the following minimum requirements:
1. Maximum duration of twenty-five years, which by agreement between the parties may be extended for successive periods of fifteen years, prior informing the Ministry of the People’s Power competent in Energy and Oil Matters and prior the authorization of the National Assembly. This extension must be requested after half of the period for which the right to conduct activities was granted has elapsed, but within five years before its expiration.
2. Identification of the company and its legal representatives.
3. Description of the project, stating the applicable technology and an estimate of the total investment.
4. Statement of the location, orientation, extension, and form of the area where the activities are to be conducted.
5. Statement of the special advantages for the Republic, in any of the following:
a. Supply of technology.
b. Stimulation of development of petrochemical industrialization and plan to use the benefits destined to favor the community.
c. Supply of infrastructure for the social benefit.
d. Maintenance of existing facilities for the social welfare.
e. Social endowment to the communities influenced or affected by the activities.
f. Training of Venezuelans for the development of the activities.
g. Substitution of imports, when necessary.
h. Advantages with respect to the prices of the products in the domestic market.
i. Estimated profitability.
6. Development projects and implementation of programs that ensure a healthy, safe, and ecologically balanced environment.
7. Any other requirements established under the Regulations of this Law.
Upon the expiration of the term of duration of the mixed companies, or their extinguishment for any reason, their assets, including works, facilities, fixtures and equipment forming an integral part thereof, and any other acquired assets used to carry out such activities, regardless of their nature and manner of acquisition, must be preserved in good condition to be handed over to the Republic for its ownership, free of any liens and without indemnity, so as to ensure the possibility of continuing the activities, if such were the case, or their cessation with the least economic and environmental damage.
Any doubts or controversies that may arise as a result of the performance of the activities contemplated in this Law, and which cannot be amicably settled by the parties, including commercial arbitration in those cases permitted by the Commercial Arbitration Law, will be decided only by the competent Courts of the Republic, in accordance with its law, and for no reason or cause may give rise to foreign claims or international arbitration.
Revocation of Authorizations Article 18. The authorization granted to conduct the basic and intermediate petrochemical activities may be revoked upon the occurrence of any of the following events:
1. Unjustified failure to comply with the conditions to which the granting of the respective authorization was subject.
2. Arrears (atraso) or bankruptcy of the company that is the beneficiary of the authorization.
3. Engagement in practices which violate rules protecting the safety and reliability of the operations carried out under the authorization, which may endanger the life or health of individuals or provoke situations of flagrant environmental risk.
4. Transfer of the authorization without complying with the requirements imposed by this Law.
CHAPTER IV
NATIONAL REGISTRY OF PETROCHEMICAL COMPANIES
National Registry of Petrochemical Companies
Article 19. The National Register of Petrochemical Companies is created, which will be kept to that effect by the Ministry of the People’s Power competent in Energy and Oil Matters.
Those companies which carry out activities regulated by this Law must register with the National Registry of Petrochemical Companies within sixty continuous days following the date on which such companies are authorized to conduct said activities.
Petrochemical Projects must also be registered, indicating the intended use of the product and a description of the project. Furthermore, the interested party must file with the competent agency the documents evidencing the expansion, reduction, or updating of the petrochemical facilities pertaining to the registered projects, for purposes of updating said registry.
Records of Transfers and Listing on the Registry of Petrochemical Companies
Article 20. The National Registry of Petrochemical Companies must record the transfers of shares, negotiations, or the judicial, administrative or other measures that affect a company that carries out any of the activities contemplated in this Law.
TRANSITORY PROVISION
SOLE. Companies carrying out activities referred to in this Law on the date upon which this Law comes into effect, must register within sixty continuous days from the date of publication of this Law in the Official Gazette of the Bolivarian Republic of Venezuela, indicting their domicile, name of legal representative and providing a certified copy of the articles of incorporation of the company. The applications filed by a company with the pertinent office will not be processed until the company complies with these aforementioned requirements.
DEROGATORY PROVISION
The Incentive Law to the Development of Petrochemical, Carbon-Chemical and Similar Activities, approved on November 1, 2005 and published in the Official Gazette of the Bolivarian Republic of Venezuela No. 38.326 on December 1, 2005, and reprinted by material error of the issuing entity in the Official Gazette No. 38.488 dated July 28, 2006 is partially repealed, leaving in full force and effect Articles 6, 7, 9, 11, 12, and 13 of the Incentive Law to the Development of Petrochemical, Carbon-Chemical and Similar Activities.
FINAL PROVISIONS
FIRST. The following are expressly exempt from Title III of the Organic Law for the Financial Administration of the Public Sector: Petroquímica de Venezuela, S.A. and its affiliates, the mixed capital companies in which any of Petroquímica de Venezuela, S.A. and its affiliates has a direct or indirect participation equal to or above fifty percent (50%) of such companies’ capital, as well as the entities that the company Fondo de Desarrollo Nacional incorporates with the purpose of financing or developing projects for petrochemical activities and with a view to the programming supplied by the President of the Republic, provided such entities’ payment capability is certified.
In order to certify the payment capability the company involved will publish in a newspaper of national circulation and, at least in one newspaper of the area where it has its principal place of business, and preferably within fifteen business days following the end of its fiscal year, a balance sheet expressly stating the amount of debt outstanding, duly signed by a public accountant registered with the Public Accountants Register and exercising independent practice, which register is kept by the National Securities Commission.
SECOND. Petroquímica de Venezuela, S.A. and its affiliates may in no event be required to place a bond or guarantee for a legal action.
THIRD. The property, income, rights or shares belonging to Petroquímica de Venezuela, S.A.
and its affiliates, are not subject to attachment, seizure, mortgage or any other preventive or executive measure. The courts taking cognizance of executions against these companies shall, after having finally decided that they are to be executed, suspend in that state the lawsuits without ordering attachment, and shall notify the National Executive so that the corresponding party will fix the terms on which the judgment is to be satisfied.
FOURTH. Public agencies in general, whatever the scope of their territorial operation, will establish actions that favor the development of the activities provided in this Law.
Petroquímica de Venezuela, S.A. and its affiliates and mixed companies will give priority to the domestic demand through the supply of products and raw materials of the petrochemical sector in a manner that adequately satisfies such demand.
FIFTH. This Law will become effective as of its date of publication in the Official Gazette of the Bolivarian Republic of Venezuela.
Given, signed and seal at the Federal Legislative Palace, seat of the National Assembly, in Caracas, on the sixteenth day of June, two thousand and nine. Years 199th of Independence and 150th of Federation.
