Venezuela enacts sweeping changes, Trump opens up oil sector to US firms

Analysts, major oil companies remain sceptical because of the country’s history of broken contracts and resource nationalism

WHAT: Sweeping changes in Venezuela’s oil legislation have been adopted, while Trump prepares to open up oil sector there.

WHY: Washington is pushing for changes to make foreign investment more attractive.

WHAT: NEXT Large-scale investment may remain elusive.

Washington is moving toward a sweeping authorisation that would permit energy firms to extract crude in Venezuela, signalling a further rollback of restrictions as part of the Trump administration’s effort to revive the country’s struggling petroleum sector.

This comes as the South American country has enacted sweeping changes in its oil legislation.

On January 29, the Treasury Department issued a ‘general licence’ for US oil companies to operate in Venezuela.

It will enable American companies to buy and resell the country’s oil and authorises numerous transactions that had previously been banned because of US sanctions, including collaborating with state-owned oil company PDVSA.

A White House spokesperson, Taylor Rogers, said the administration is focused on enabling investment in Venezuela’s oil facilities and suggested additional announcements were imminent.

“This is an extraordinary licence because on its face it only benefits US oil companies,” Jeremy Paner, a partner at law firm Hughes, Hubbard & Reed, told the Financial Times.

US policy shift

The policy shift is designed to draw in companies linked to the US to help restore production in a nation that sits atop some of the world’s largest hydrocarbon deposits. The effort follows a US military action in Caracas that resulted in the detention of ex-president Nicolás Maduro.

Earlier in January, Washington had issued a separate authorisation allowing firms to trade Venezuelan crude. That approval covers activities such as shipping, exporting, transporting, and processing oil when handled by established American companies.

Before that, individual waivers were granted to commodity traders Trafigura and Vitol, allowing them to resume Venezuelan oil transactions after a limited US naval blockade had constrained exports and pushed storage capacity to its limits.

With those constraints easing, Venezuela’s heavy crude is once again reaching international buyers. Attention is increasingly turning toward refiners in the US, rather than China, which had long taken most shipments at deep discounts under sanctions. Historically, US refiners were the primary destination for Venezuelan oil and many are configured to process Venezuela’s heavy sour crude.

Following Maduro’s capture on January 3, the Trump administration endorsed former vice president Delcy Rodríguez and pledged to stabilise the economy by intervening in the deteriorated oil industry.

Despite these steps, companies without an existing presence in the country remain cautious, citing concerns over political uncertainty and the longevity of the current leadership, according to people briefed on the matter.

New Venezuela oil legislation

Venezuela’s interim president, Delcy Rodríguez, had hours before enacted sweeping changes to the country’s oil legislation, signing a reform bill that opens the door to greater private participation just as Washington moves to soften long-standing energy sanctions.

Rodríguez formalised the law during a public event attended by state oil employees, describing the overhaul as essential for the nation’s long-term prospects. “We’re talking about the future. We are talking about the country that we are going to give to our children,” she said.

The signing followed rapid approval by Venezuela’s National Assembly, which is controlled by Rodríguez’s United Socialist Party. Assembly president Jorge Rodríguez, her brother, framed the move as a turning point after years of hardship, saying, “Only good things will come after the suffering.”

Under the new framework, private companies will be allowed to manage oil production and commercialisation, while disputes will be settled outside Venezuelan courts, addressing long-standing complaints from international firms about political influence over the judiciary. Government royalties will also be capped at 30%.

At the same time as the law was signed, the US Treasury Department announced limited sanctions relief. It said certain transactions involving Venezuela’s government and state producer PDVSA would now be authorised if they were “necessary to the lifting, exportation, re-exportation, sale, resale, supply, storage, marketing, purchase, delivery, or transportation of Venezuelan-origin oil, including the refining of such oil, by an established US entity.”

End of Chávez oil policy?

The shift marks a departure from the comprehensive restrictions imposed on Venezuela’s oil industry in 2019 during Trump’s first term. US officials say the combined measures are intended to make the country’s energy sector more attractive to foreign operators, though investor caution remains widespread.

Venezuela nationalised its oil industry in the 1970s, and control was tightened further in 2007 under Hugo Chávez, who expanded state ownership and expropriated foreign assets. Those actions triggered years of arbitration claims by companies such as ExxonMobil and ConocoPhillips.

Following Maduro’s removal, US officials have stated that Washington will determine how Venezuelan oil is sold and where revenues are held, dismissing concerns over sovereignty that critics say were underscored by the deadly operation that led to Maduro’s capture.

Rodríguez recently said that investment in oil is expected to rise to about $1.4bn this year, compared with roughly $900mn previously. Consultancy Enverus estimates production could climb to 1.5mn barrels per day (bpd) by 2035, with more optimistic projections reaching as high as 3mn bpd, depending upon market conditions.

Analysts, however, caution that profitability is constrained by the high cost of extracting the heavy crude from the Orinoco Belt and the need for extensive infrastructure spending.

The reform reverses parts of the Chávez-era hydrocarbon regime by scrapping six supplementary regulations tied to the 2006 oil law. Former deputy oil minister Dolores Dobarro said the shift marked a clear break from the past. “Every aspect of the oil business will no longer be 100pc state-owned, like Chávez wanted,” she told Argus, adding, “I’m for it, I think it’s fine.”

Fiscal terms will also change. The state’s share of revenue will no longer be fixed at more than 83%, instead ranging from roughly 65-80% or lower depending on the project. Royalties, previously set at 33.33%, will move to a variable scale between 15- 30%, while the uniform 50% tax rate has been dropped without a replacement yet specified. Oil and gas investors will also receive exemptions from several national and local taxes.

What’s next?

Still, uncertainty persists. “A lot has been left to the discretion of the authorities with these modifications,” another former oil minister told Argus, while suggesting companies such as Chevron may still view the reforms positively.

The overhaul represents the most significant change to Venezuela’s oil framework since 2006, granting private firms greater control over marketing and operations and formalising production-sharing arrangements that previously existed informally.

But lawyers and executives cited by Reuters say the measures fall short of what is needed to justify large-scale investment.

Ali Moshiri, chief executive of Amos Global Energy Management, called the law a temporary solution. “This is sufficient enough for the transition, until there is a permanent government in Venezuela,” he told Reuters, warning, “If you don’t make this (industry) more attractive, the entire progress we want to make is going to come to a halt.”

Scepticism is rooted in Venezuela’s long history of contract breaches. “The past seven decades of Venezuela’s oil industry are marked by broken contracts and resource nationalism,” Francisco Monaldi of Rice University’s Baker Institute wrote in Americas Quarterly, arguing that no agreement has survived without major deterioration.

Critics also point to vague language in the bill and the broad authority it grants the oil ministry, including the ability to alter royalties without legislative approval. José Guerra, a former central bank official, told Al Jazeera: “This law is a law of ambiguity, designed to avoid openly breaking with Chávez’s oil legacy. It is not emphatic about private participation.”

While some oil is returning to global markets through discounted spot sales, major producers remain hesitant. ExxonMobil chief executive Darren Woods recently described Venezuela as “uninvestable” during a meeting in the White House, citing repeated asset seizures.

Although Trump reacted angrily to the comment, industry leaders continue to signal that without legal certainty, security guarantees and clearer fiscal terms, large-scale investment will remain elusive for some time.