Venezuela's interim president's oil law reform to break with Chavez model

"Venezuela's parliament has advanced a proposal to loosen the state's control over its oil industry and boost the private sector's role in the first major overhaul of the industry in years. The proposal to reform Venezuela's Hydrocarbons Law was thrust upon the country after the abduction of former President Nicolas Maduro by the United States on January 3 and had generated significant interest across businesses and political parties."

"The new text allows direct commercialisation by private companies, permits the opening of bank accounts in any currency and jurisdiction, and, while reaffirming PDVSA's majority stake in joint ventures, allows minority partners to exercise technical and operational management. It further introduces flexibility in royalty payments, lowering them from 30 percent to as little as 15 percent of extracted crude as an incentive to attract investment, particularly new drilling in undeveloped areas."

"In the wake of those events, the White House and US Energy Secretary Chris Wright announced a $500bn energy agreement between the two countries, under which Washington seeks to exert significant influence over Venezuela's oil industry. Approved in its first reading on Thursday, the reform breaks with several principles of the oil nationalisation carried out by former President Hugo Chavez in 2006, which reserved exclusive crude marketing rights for state-owned oil company PDVSA."

Venezuela's parliament approved in first reading a proposal to reform the Hydrocarbons Law, the first major industry overhaul in years. Opposition declined to vote because they received the bill only shortly before it was tabled. The reform followed the reported abduction of former President Nicolas Maduro by the United States on January 3 and a $500bn energy agreement announced by the White House and US Energy Secretary Chris Wright. The new text permits private companies to commercialise crude directly, open bank accounts in any jurisdiction, allow minority partners technical and operational roles, repeal state reservation of ancillary services, permit subcontracted extraction with assumed risks, lower royalties from 30% to 15%, and introduce independent dispute-resolution mechanisms such as mediation and arbitration.

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