Venezuela oil law revamp falls short of capital needed for sector overhaul

Venezuela’s proposed overhaul of its hydrocarbons law is designed to ease the expansion of companies already operating in the country and draw in fresh investors, Reuters reported.

However, it is unlikely to unlock the roughly $100bn that the US says is required to modernise the energy industry.

The legislative push follows Washington’s move to assume control of Venezuela’s oil exports and revenue stream after a military operation aimed at capturing Nicolás Maduro and the subsequent imposition of a naval blockade. 

US officials have said the management of the country’s energy income will be indefinite, framing it as a tool to steer Caracas in line with American foreign policy goals while encouraging US oil producers to commit capital to a sector hollowed out by years of mismanagement.

The reform, introduced by interim president Delcy Rodríguez, would dilute PDVSA’s long-standing operational monopoly by giving partners in joint ventures more authority over projects, direct access to sales revenue and looser operating conditions. It also embeds production-sharing contracts in law, opens the door to royalty cuts of as much as 15% and allows for independent arbitration mechanisms.

Even so, industry groups and legal experts argue the draft leaves key tax and trading provisions unclear and, in some cases, contradictory. Elevated fiscal burdens — including a so-called shadow tax — remain in place, alongside lingering uncertainty over legal safeguards and recourse to international courts.

Concerns have also been raised over the expanded discretion granted to the executive branch and the limited role of the National Assembly, as well as the absence of steps to tackle PDVSA’s deep-rooted structural problems and corruption. 

As a result, analysts expect major US producers to stay on the sidelines until the rules are clearer and the institutional backdrop more durable.