The Venezuelan Parliament, controlled by the governing chavistas, approved on Thursday a reform of the hydrocarbons law that changes the landscape of the oil industry, until now state-owned, to allow for greater participation from private and foreign investors as the country negotiates with the United States for the sale of its crude. The amendment received legislative approval on the same day that the U.S. Department of the Treasury issued a general license that permits certain transactions with Venezuelan oil, which also marked a shift in the policy of Republican Donald Trump, who had approved sanctions against the state-owned Petróleos de Venezuela (PDVSA) in 2019 during his first term in office. Following the capture of Nicolás Maduro during a U.S. military operation in Caracas and three neighboring regions, both countries began negotiations over Venezuelan oil, which now has a new legal framework. Here are some key points to understand the new law reform: End of Nationalization The law repealed the norm that regulated private participation and granted PDVSA exclusive control over exploration, extraction, transportation, commercialization, export, and storage activities; instead, an amendment was added—Articles 23 and 68—which allow mixed and private companies domiciled in the country to carry out these tasks. Until now, the State held the majority of the shares in the agreements that PDVSA maintains with private partners in mixed companies (strategic partnerships). In another article, Article 40, it is established that the State may sign contracts with private firms for them to execute primary activities (exploration, extraction, collection, transportation, and storage). In these agreements, the private company will assume said activities 'at its sole cost, account and risk, prior to demonstrating its financial and technical capacity.' Private Participation The norm that reserved for the State the goods and services related to hydrocarbon activities was also rendered void. In this case, a new article was included—Article 42—which allows operating companies to use 'assets and materials' from PDVSA. Similarly, these companies are granted 'the use of the operational area' and a 'delimited area, upon authorization' from the Ministry of Hydrocarbons. He also demanded reparations for the individuals and companies in the sector whose assets were confiscated. Royalties Royalties, until now fixed at 30%, will fluctuate with the law reform. With a cap of 'up to 30%,' it will be the Executive Branch, 'prior to the opinion of the ministry with competence in financial matters,' that will determine 'the percentage or percentages of royalty applicable to each project,' taking into account its nature, investment, economic viability, and 'the need to ensure international competitiveness.' The Executive Branch, through the ministry with competence in hydrocarbons, 'is empowered to modify the royalty percentage within the limit set' when 'it is demonstrated that it is necessary to guarantee the economic balance of the project,' adds Article 51. Experts in the field, such as former Oil Minister Rafael Ramírez, believe this decision will only favor outsiders and not the State, thus breaking with Chávez's policy, whom Maduro considers his political godfather. Arbitration Conflicts can now be resolved in 'competent courts of the Republic or through alternative dispute resolution mechanisms, including mediation and arbitration,' establishes Article 8 of the law. For Ramírez, this cedes 'jurisdictional sovereignty, in violation of Article 151 of the Constitution.' The former official, who headed the Oil portfolio from 2002 and PDVSA from 2004 until 2013, warned that 'in addition to the privatization of oil activities, both primary production and oil export,' with the reform 'the assets and rights of PDVSA are handed over to private operators.' With this, in his opinion, the end of the 'national company is decreed, to convert it into a mere administrative agency of contracts.'
