Venezuela has ramped up its show of pressured concessions to its shotgun marriage with US oil interests, including proposing legal reforms and vowing to open up its upstream for new business. Most international firms will want to see more before committing to a longer-term union, after decades of neglect and broken promises.
Venezuela's interim president, Delcy Rodriguez, has asked lawmakers in the national assembly dominated by her party to approve changes to laws over oil, electricity and mining to help draw investment. The proposed reforms would target investment in greenfield areas, allowing companies other than state-owned PdV to operate them. The changes also seek to create a new hydrocarbons regulator and reduce some taxes and royalties, according to a draft seen by Argus.
Venezuela holds about 17pc of the world's oil reserves, mostly extra heavy crude ideal for some US refineries, although few details have been released in recent years. Rodriguez's focus on new fields could be a condition from the US, to ensure investment openings beyond just improvements to PdV's fields, sources say.
Early steps to enable companies to return to Venezuela "are already well under way", US oil services giant Halliburton says. Halliburton entered Venezuela in 1938 and left in 2019 to comply with US sanctions. Echoing many firms, Halliburton says commercial and legal terms must be in place before it returns to its business in Venezuela, which was worth about $500mn a decade ago.
But the legal changes planned by Rodriguez's government are unlikely to satisfy several oil companies that have pending complaints over expropriations from years ago, including ConocoPhillips' three claims worth up to $12bn. US president Donald Trump has advised such complainants to write off their claims.
The proposed legislative changes may face little challenge, with discussions in the assembly having started on 22 January. The assembly's one opposition member, former Miranda state governor Henrique Capriles, had received no information on the proposal as of 21 January. "It looks like they want to fast-track the oil law," Capriles says. "We Venezuelans do not know its reach." Venezuela's political opposition has long called for an overhaul of the oil sector to allow for private-sector investment, as well as a return to democracy. The opposition had outlined a plan for $100bn of investment to boost Venezuela back to its peak of 3mn b/d of output, from about 1mn b/d now, but Trump has shut the opposition out of any political transition.
Power struggle
The proposed reform may do little to overhaul Venezuela's existing oil field sprawl of rusted pipelines and equipment after decades of insufficient maintenance and capital. The country requires massive investment in its power infrastructure alone to support crude output. Spanish energy firm Repsol, which has joint ventures in gas with PdV, and Italy's Eni are together responsible for about half of the gas that powers Venezuela's thermal generators, and they are poised to scale up operations for a larger share. Other upstream operators including ExxonMobil have indicated they will hold back from Venezuela unless terms are made sacrosanct.
The Rodriguez administration has also taken steps that seem to run counter to an opening for investment. Rodriguez has further centralised power by taking on multiple roles, while holding back on naming a new vice-president. She has vowed to continue supporting Cuba despite Trump's insistence she stop, although this message may be directed at domestic supporters of former president Nicolas Maduro, who is currently jailed in the US. Promises to release more political prisoners have not been kept in full, and crackdowns on dissidents continue. Trump has indicated he may hold direct talks with Rodriguez soon.
