Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Venezuela’s national assembly has backed a new hydrocarbons law that would open up the socialist country’s oil sector to private companies, potentially undoing a quarter-century of state dominance.
The legislation, which has been seen by the Financial Times, allows foreign and local private companies to operate and commercialise oilfields, lowers the government’s tax take and allows for international arbitration in case of disputes.
Under the bill, which was approved during an initial debate on Thursday afternoon, private Venezuelan companies would be able to operate oilfields at their own cost. Joint ventures would continue to require a majority state-owned stake.
The law, if given final approval when lawmakers vote again next week, would maintain a baseline royalty rate of 30 per cent, though it would allow reductions to 20 per cent and 15 per cent in certain cases, “in order to achieve the economic viability” of projects. The proposal also eliminates the mandate that disputes are settled in local courts.
The debate follows a US special forces raid on January 3 on Caracas that captured Venezuela’s authoritarian leader Nicolás Maduro and his wife Cilia Flores, who were sent to face drug-trafficking charges in New York.
Under Maduro’s populist predecessor Hugo Chávez, who ruled from 1999 until his death from cancer in 2013, Venezuela expropriated assets belonging to US oil companies, including ExxonMobil and ConocoPhillips, while installing political and military allies at Petróleos de Venezuela SA (PDVSA), the state oil company.
US President Donald Trump said in the aftermath of the operation that Washington would “run” Venezuela, and effectively control its oil sector. As part of its pressure campaign, the US has also seized seven sanctioned oil tankers that it said were used to transport the Latin American country’s crude.
US energy secretary Chris Wright said in an interview with Bloomberg Television on Thursday that the White House is “not going to get involved in providing on-the-ground security” to oil companies that operate in Venezuela.
The country’s interim president, Delcy Rodríguez, whom Trump has backed to usher in foreign investment into the country’s oil sector, last week hinted sweeping reform was under way.
Rodríguez told lawmakers last week: “This will allow investment flows to be directed to new fields, to fields where no investment has ever been made and where there is no infrastructure.”
“These reforms are necessary to allow for an increase in oil production,” said Jorge Rodríguez, Delcy’s brother who heads the legislature, on Thursday as lawmakers prepared to vote. “As the acting president has said, oil underground is useless.”
Venezuela has the world’s largest proven oil reserves, estimated at about 300bn barrels, and pumped roughly 3m barrels a day at the turn of the century. Years of corruption and mismanagement led production to collapse to about 500,000 b/d in 2020, with sweeping US sanctions on the sector imposed during Trump’s first administration complicating the outlook.
Production last year rose to roughly 950,000 b/d, largely buoyed by Chevron, whose sanctions exemption licence makes it the only US oil major operating in Venezuela. The new law would build out the contracts established with the company in 2022.
US groups have said they need “serious guarantees” before committing investment to rebuild Venezuela’s crippled oil infrastructure. These include reforms that would enable them to sign contracts with local companies and protect them against expropriation of their assets.
Chevron did not provide a specific comment on the new reforms but reiterated its continuing commitment to invest in the Caribbean nation. It said: “We stand ready to help it build a better future while strengthening US energy and regional security.”
Some observers have questioned whether the Rodríguez government has the legitimacy to enact reforms that will attract more foreign investment. Rodríguez was serving as Maduro’s vice-president when he was ousted by Washington. Maduro is widely regarded to have stolen his re-election in 2024.
“The law isn’t being discussed by a legitimate authority, which strips it of juridical and political weight,” said Iván Freites, a union leader of PDVSA workers, who now lives in exile in Florida.
“We know that these guys stole elections and have committed widespread human rights violations, so while we support opening up the oil sector, it must be done with guarantees for these companies that their investments won’t be stolen or expropriated,” Freites added.
Read the full article here
