Material new international investment in Venezuela’s oil sector won’t happen without significant fiscal and legal reforms, large operators say, but a sweeping set of changes to the Chavez-era hydrocarbon law — passed on Jan. 29 — help the industry get at least part of the way there. The amendments — introduced by interim President Delcy Rodriguez less than a month after the shock ouster of Nicolas Maduro — offer more operational control and legal protections to private and international companies, while also formally giving the state complete oversight over these more varied structures and their terms. Industry insiders say the reforms are a good start, while acknowledging many regulatory, political and security questions remain outstanding. Venezuela’s Organic Law on Hydrocarbons, passed in 2006, precipitated the exit of many Western oil giants by forcing them to surrender operatorship and majority interests in projects to state-owned Petroleos de Venezuela (PDVSA). The subsequent expropriation left a sour taste in the mouths of companies like Exxon Mobil and ConocoPhillips, which are both still owed billions in court-awarded claims and have said, unsurprisingly, that they need a variety of legal assurances, among other things, to consider returning. Amended changes include allowances permitting private firms to pursue independent arbitration to address contractual disputes, reversing current law restricting such claims to Venezuelan courts and local legal norms. But local industry legal experts note the law’s language makes this optional rather than guaranteed — ambiguity that large Western firms will likely view as insufficient.
