Venezuela’s parliament has proposed a proposal to lessen the state’s influence over Venezuela’s oil industry and strengthen the private sector’s role in the first major industry overhaul in a long time.
Following the US’s abduction of former president Nicolas Maduro on January 3, Venezuela’s hydrocarbons law was proposed to reform it, which had attracted significant business and political party interest.
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Following those events, US Energy Secretary Chris Wright and the White House made the announcement of a $500bn energy deal between the two nations, which would allow Washington to have significant influence over Venezuela’s oil industry.
The reform, which was approved in its first reading on Thursday, disintegrates several tenets of former president Hugo Chavez’ 2006 plan, which gave the state-owned oil company PDVSA exclusive rights to crude marketing.
The new text reaffirms PDVSA’s majority stake in joint ventures, permits minority partners to exercise technical and operational management, and permits direct commercialization by private companies. It also permits the opening of bank accounts in any currency and jurisdiction.
Additionally, the bill proposes repealing the law that allows private companies to subcontract oil extraction, provided they bear the associated costs and risks, for the state to retain ancillary services related to primary oil activities.
Further, it allows for more flexible royalty payments, cutting them from 30% to as little as 15% of the extracted crude as a propulsion to attract investment, particularly new drilling in underdeveloped areas.
Another significant change seeks to incorporate legal safeguards through independent dispute-resolution mechanisms like arbitration and mediation.
Executives from multinational oil companies discussed legal certainty with US President Donald Trump on January 9 during a meeting to discuss multibillion-dollar claims made by ExxonMobil and ConocoPhillips against the Venezuelan state following the 2007 nationalization process.
The “Legal of Ambiguity”
The proposal is still fraught with rhetoric, according to economist Jose Guerra, former Central Bank director of research. He contends that there is no explicit agreement between private companies and private companies regarding the ownership of majority shares.
Guerra remarked that “this law is a law of ambiguity” to prevent people from “blatantly breaking with Chavez’s oil legacy.” It doesn’t emphasize private participation at all.
He noted that production participation contracts (CPP), under which companies could effectively hold more than 50% of the market, have already been used by the government to cede ground to private capital.
When Rodrigueez was minister of energy and oil in 2024, the CPP framework was created. Due to the protection provided by Article 37 of the Anti-Blockade Law, which was passed to obstruct sanctions imposed on PDVSA in 2019, its operation has been marked by opacity.
The existing Hydrocarbons Law, which restricts private or foreign capital to joint ventures in which PDVSA must hold a majority stake, is broken by that provision, which allows the government to bypass.
Rodrigues told the National Assembly on January 15 that oil production rose from 900,000 barrels per day to 1.2 million barrels per day, and that investments in this industry totaled nearly $900 million in 2025 as a result of the introduction of CPPs in April of that year.
The draft was not made public until a few hours before lawmakers convened for their first debate, which caused controversy. The opposition voted against the bill, arguing that it should be interpreted as a “social pact” in a nation with the largest oil reserves as a result of extensive and thorough consultation among all parties.
‘Model Chevron’
The law formalises what is known as the “Chevron model,” according to Luis Oliveros, dean of the Metropolitan University in Caracas, as a positive sign.
He added that it gives foreign companies more flexibility to take over the joint ventures’ technical, operational, and financial management. He continued, noting that foreign investors would have been more interested if PDVSA had been forced to sell its mandatory majority stake.
The reform, according to Oswaldo Felizzola, director of Venezuela’s International Center for Energy and Environment (CIEA), has enough elements to entice new investors to invest in the sector, but ultimately falls short.
The proposal “is necessary but not sufficient,” he said. According to Felizzola, the law needs to be updated for the 21st century. It is no longer as statist as it would paralyze the industry, though.
He noted that many well-established businesses could switch to a different operating model to increase profits, but he cautioned that the framework still has significant shortcomings. It does not consider current or upcoming issues, such as climate change, and it is not a law that will determine oil’s future role, he said.
The reform’s requirements, in Felizzola’s opinion, are more similar to those in place in Venezuela in the latter half of the 20th century. Are additional changes required? Yes. However, at least enough are in place to work with and be permitted by the Venezuelan government.
Before it can be passed, the reform bill must now go through the National Assembly’s consultation phase and undergo a second, article-by-article debate. When that will occur is unknown.
Venezuela’s economy is already being affected by the Trump administration’s energy cooperation. The US government made its first $ 300 million from US crude sales this week, with the goal of stabilizing the global exchange market.
