Venezuela Opens Debate on Historic Oil Sector Overhaul Amid US Pressure
Venezuela's National Assembly has initiated a pivotal debate on a comprehensive bill to overhaul the country's oil sector, marking the first significant legislative change since the era of the late socialist leader Hugo Chávez. This move represents a dramatic shift away from the resource nationalism that has defined Venezuela's energy policy for nearly two decades.
Legislative Shift Towards Private Investment
The proposed legislation, a draft of which has been reviewed by The Associated Press, aims to loosen state control over Venezuela's vast oil reserves. It seeks to create new opportunities for private companies to invest in the industry, a stark departure from Chávez's 2007 nationalisation policies. Under the new bill, private firms would be allowed to independently operate oil fields, market their own crude output, and collect cash revenues, even while remaining minority partners with the state oil company on paper.
Jorge Rodríguez, president of the National Assembly and brother of acting President Delcy Rodríguez, emphasised the bill's goal to "allow an accelerated increase in production" of oil in Venezuela. He notably stated, "Oil under the ground is useless," highlighting the urgency to boost production and explore new opportunities.
International Arbitration and Financial Incentives
A crucial aspect of the bill is the provision for companies to settle legal disputes through arbitration in international courts, rather than being restricted to local Venezuelan courts. This change is designed to provide greater legal security for foreign investors. Additionally, while the current 30% royalty rate would be maintained, the government could reduce royalties and taxes to as low as 15% for expensive or hard-to-develop oil projects, incentivising investment in challenging areas.
During the debate, Orlando Camacho, a lawmaker and head of Venezuela's national Fedeindustria business association, argued that these legal guarantees are essential to attract private investment, ensuring the oil industry "remains the engine of the country."
US Pressure and Political Context
The debate comes amid increased pressure from the Trump administration, following the U.S. capture of former President Nicolás Maduro earlier this month. The U.S. is urging acting President Delcy Rodríguez and other allies of the ousted leader to invite greater investment from American energy companies into Venezuela's struggling oil sector. This push appears to respond to demands from U.S. oil executives seeking more favourable operating conditions.
However, significant challenges remain. Many investors are wary of the financial and legal risks, given past experiences where assets were seized during Chávez's nationalisation. Firms like Exxon have long sought compensation for billions in losses without success. Political uncertainty also persists, with no clear timeline for democratic elections after Maduro's ouster, and crippling U.S. sanctions remain in place, further complicating foreign operations.
The bill, promoted by Delcy Rodríguez, is expected to advance quickly through the ruling party-dominated legislature. Lawmakers concluded the initial discussion after about two hours, moving the legislation to a second round of debate, though a schedule has not yet been set. This legislative effort underscores Venezuela's attempt to revitalise its oil industry amidst domestic and international pressures.
