International oil companies push for quick reforms in Venezuela to give them control over oil exports

[HOUSTON] Oil executives and lawyers for international oil companies are lobbying the US and Venezuelan governments for changes in the Opec member’s hydrocarbon law that would give them the right to freely export the oil they produce in Venezuela, sources involved in the talks said.

As the administration of US President Donald Trump works to convince energy companies to start work quickly on his US$100 billion reconstruction plan for Venezuela’s dilapidated oil industry, many potential investors are trying to figure out how to make that happen without spending years waiting for legal and contractual reforms that would protect their investments.

To get things moving, representatives of international oil companies are seeking a few modifications to the existing legal framework for the industry that would leave state-run oil giant PDVSA as the majority stakeholder of all oil joint ventures, but would grant foreign partners control of their share of production and give them access to the company’s oil terminals and export infrastructure to facilitate shipments.

That would be a change from the existing law, which states oil produced must be controlled by PDVSA.

The state company is entitled to sell the oil and deposit the proceeds into joint venture accounts with foreign oil companies to secure cash flow for expenses and investment in the fields, as well as dividends.

But that system became impossible to execute under US sanctions imposed on Venezuela’s oil industry since 2019, leading to the build up of billions of US dollars in debt owed by PDVSA to its partners, including US oil major Chevron, Italy’s ENI and Spain’s Repsol.

International oil companies are also seeking to remove extra taxes introduced by the government after the law was approved in 2021, only preserving royalties and income tax, the people said.

The tax reform would lead to a smaller government take of the value of the oil produced. Under current laws, the government take is among the highest in Latin America, guaranteeing Venezuela at least 50 per cent of the oil’s value.

PDVSA and the oil ministry did not reply to requests for comment.

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Venezuela’s interim president and oil minister, Delcy Rodriguez, said on Thursday she was submitting a government proposal to Congress to reform the country’s hydrocarbon law to allow “investment flows to be incorporated into new fields, fields where no investment has ever been made and into fields where there is no infrastructure.”

The proposed reform has yet to be made public, but she said the government would incorporate into the legislation a series of oil contracts approved under President Nicolas Maduro. Those contracts were never made public.

For many oil companies, the legality of those contracts was unclear because the terms were not covered by the oil law. The deals were signed amid US sanctions, which forbade investment in Venezuela’s oil sector, and negotiated with a group of little-known companies without public oversight.

Venezuela’s opposition has for over a decade criticised the opaque nature of the contracts, as well as companies that continued to do business with the Maduro government under sanctions. REUTERS