Venezuela foes intersect on strategic oil plans

Venezuela's US-backed opposition issued a final version of its oil industry reform package today, two days after the government that it aims to force out leaked broadly similar preliminary recommendations grounded in private-sector investment.

The detailed 42-page hydrocarbons bill would replace Venezuela's 2001 hydrocarbons law that cemented state control over the oil industry. Drafted by a tight group of Venezuelan technocrats abroad, the bill will now come before the opposition-controlled National Assembly headed by Juan Guaido, the country's Western-recognized interim president.

The bill is designed in conjunction with the goals of boosting crude production to 3mn b/d from a current 500,000-600,000 b/d in eight years, based on $99bn in capital investment, $64bn in operating investment, the drilling of 11,400 wells and the deployment of 106 drilling rigs. In promotional material accompanying the bill, proponents say the reform would "open the doors to take advantage of the country's immense geological potential."

A figure close to the opposition described the timing of the two proposals as "pure coincidence". But the noise generated by the release of the government plan could drown out the formal introduction of the opposition blueprint, with the government effectively co-opting a reform agenda spearheaded by Guaido's advisers but without the political capital and conviction needed to implement it.

The upshot in the legislative initiative and the recommendations of the presidential restructuring commission alike is a broad opening to outside investors, removing the monopoly mandate of state-owned PdV. Both initiatives are anchored on the notion that oil companies will rush into Venezuela to invest across the value chain, once more flexible and competitive conditions are laid out.

But last month's oil price crash and pandemic-sapped demand across the globe, on top of Venezuela's chronic political instability and US sanctions, cast doubt on such near-term assumptions.

While the dueling proposals overlap in their overall thrust, the extensive opposition bill is the fruit of months of quiet political negotiations and adjustments, and features a deep dive into fiscal and regulatory terms, among other matters. The opening process would be similar to Mexico's now-stalled 2014 energy reform.

In contrast, the government's broad-brush preliminary recommendations emerged out of the PdV restructuring commission that was only appointed in February 2020. The commission was chaired by then-industry minister Tareck El Aissami, whom President Nicolas Maduro named acting oil minister this week. The deputy chair was Asdrubal Chavez, who is now acting chief executive of PdV.

Among the distinctive features of the government plan is the establishment of a PdV subsidiary in Russia to absorb the firm's European assets.

By Patricia Garip