Venezuela’s acting president has signed into law a bill making significant changes to the country’s oil sector after pressure from the US to open it up to foreign private investment.
The new hydrocarbons law promises to give private companies control over oil production and sales, ease taxes and allow for independent arbitration of disputes, while largely maintaining state control over oil production.
Analysts remain cautious about the law’s practical application, arguing that the text lacks clarity and that the changes, while welcome, are insufficient to deliver the overhauls sought by the US as it attempts to revive Venezuela’s battered oil industry.
“We’re talking about the future. We are talking about the country that we are going to give to our children,” said Delcy Rodríguez, the acting president, who signed the law shortly after its approval by congress.
The congressional leader, Jorge Rodríguez – who is the acting president’s brother – celebrated the law’s approval. “I congratulate the people of Venezuela. Only good things will come after the suffering. These are the good things, for everyone, that we must build together, regardless of how we each conceive the prosperity of our republic,” he said.
Earlier on Thursday, Delcy Rodríguez held a phone call with Donald Trump, who disclosed the conversation during his cabinet’s first meeting of the year. Trump said he was about to “open up all commercial airspace over Venezuela”. Since the US president, while ramping up pressure on the dictator Nicolás Maduro, declared Venezuela’s airspace “closed in its entirety”, at least eight international airlines have suspended operations in the South American country.
Trump said big US oil companies were already on the ground in Venezuela carrying out site assessments for potential operations. He said they were “scouting it out and picking their locations, and they’ll be bringing back tremendous wealth for Venezuela and for the United States”.
The Trump administration also eased some sanctions on Venezuela’s oil industry. The US Treasury issued a general licence authorising transactions involving the Venezuelan regime and the state-owned Petróleos de Venezuela (PDVSA).
Since the naval blockade to halt oil shipments on sanctioned vessels and the 3 January military operation that captured Maduro while leaving his entire cabinet in power, the US has taken control of Venezuela’s oil exports and revenues, which the White House has said it intends to retain indefinitely to ensure the regime follows its foreign policy objectives.
The US-supported changes to the hydrocarbons law were approved at first reading last week and underwent a fast-tracked “public consultation” process before being unanimously approved at the second and final reading on Thursday by the regime-loyal National Assembly.
The new law stipulates that even when they are minority partners in joint ventures with PDVSA, private companies may exercise “technical and operational management” directly, breaking with the previous rule that required state control over operational decisions. It also provides for a possible reduction in royalty payments to the regime from 30% to zero.
David Vera, an associate dean in the Craig School of Business in the US, said the new law “was necessary, and overall a positive step. But it still falls short of what US oil companies need to commit capital at scale. Yes, there’s more flexibility on royalties, taxes, arbitration, and commercialisation, but a lot of executive discretion and legal uncertainty remains.”
According to José Ignacio Hernández, a legal scholar and researcher of Venezuela’s oil industry who works with the consultancy Aurora Macro Strategies, the new law “improves some aspects of the previous draft by granting greater contractual stability to private investment”, but it “fails to address all the causes that led to the collapse of the oil sector”.
Venezuela holds the world’s largest proved oil reserves but accounts for less than 1% of global production.
The country was once the world’s largest exporter after emerging as a significant oil producer in the 1920s. Production was nationalised in the 1970s with the creation of PDVSA, which came under Hugo Chávez’s control in the 2000s, when Maduro’s mentor and predecessor dismissed most of its leadership and technical staff.
After an initial boom under Chávez, production collapsed after years of mismanagement and corruption, compounded by US sanctions, falling from 3.4m barrels a day to about 1m.
“The most troubling aspect of the new law is the lack of consultation and political dialogue,” said Hernández, noting that despite regime claims that more than 120 proposals were received during this week’s fast-tracked process, there was no meaningful public debate.
Gonzalo Escribano, who heads the energy and climate programme at the Elcano Royal Institute in Spain, said Venezuela’s oil market would only become genuinely attractive to foreign investment after a democratic transition – something for which the US has yet to set a timetable.
“A transition to democracy is needed so that there is a legitimate government and all decisions taken and laws approved have a legitimate constitutional backing and cannot simply be reversed,” said Escribano.
Hernández said: “It will be, I fear, a short-lived law.”
