New regulations signed by acting President Delcy Rodriguez weaken state oil giant PDVSA’s control and expand opportunities for American companies as Venezuelan crude production approaches 1.2 million barrels per day.
By yourNEWS Media Newsroom
CARACAS, Venezuela — Venezuela has taken another major step away from the state-controlled oil model that governed its energy industry for decades, adopting regulations that expand private-sector authority across production, refining, marketing and distribution as American companies reconsider investments once viewed as too risky.
Acting President Delcy Rodriguez signed the new rules this week, advancing changes to the country’s principal oil law and effectively reducing the control of Petróleos de Venezuela SA, the national company commonly known as PDVSA, over the nation’s vast petroleum resources, according to a report by Just the News.
The regulatory shift comes as Venezuela’s oil output has risen sharply. The country produced fewer than 600,000 barrels per day in May 2021 despite possessing the world’s largest oil reserves. By this past May, production had climbed to nearly 1.2 million barrels per day.
The rebound and restructuring follow efforts by the Trump administration to move Venezuela toward a system capable of attracting foreign capital, restoring neglected infrastructure and increasing production.
Since the capture of former Venezuelan President Nicolás Maduro in January, the administration has encouraged legal and economic reforms intended to break apart the centralized model that discouraged international energy companies from committing money and equipment to the country.
The latest regulations signed by Rodriguez establish how private companies may operate throughout the industry, from oil wells to retail sales. They also create tax structures based on the risks associated with individual assets, including offshore projects.
PDVSA is not mentioned in the new rules. The absence reflects a broader reduction in the company’s role after it began transferring managerial authority over some oil production to Chevron and other private companies in 2022.
The reforms further open areas that had long remained under government control, including crude refining, fuel marketing and petroleum distribution.
Venezuela nationalized its oil sector during the 1970s. That state-dominated structure became more restrictive in 2007, when former President Hugo Chávez ordered foreign oil companies to surrender majority ownership in their Venezuelan operations to the government.
ExxonMobil and ConocoPhillips left the country rather than accept the terms. Chevron was the only major American producer to agree to Chávez’s demands and continue operating under the altered ownership system.
Years of state control, inadequate investment and deteriorating infrastructure contributed to a severe production decline, leaving the country unable to fully develop its enormous reserves.
U.S. Companies Reconsider Venezuelan Investments
President Donald Trump brought more than two dozen oil executives, infrastructure companies and project-finance representatives together in January to discuss expanding Venezuelan production and securing a substantial role for American businesses.
Industry leaders initially responded cautiously.
Venezuela’s pipelines, wells, refineries and other energy infrastructure had suffered years of neglect and damage under socialist rule. Restoring or replacing those systems was expected to require tens of billions of dollars. Trump publicly suggested the necessary investment could total $100 billion.
Companies also wanted guarantees that their assets would not again be seized by the state. Executives sought protections for employees and equipment amid concerns about criminal violence, political instability and the possibility of renewed expropriation.
Exxon CEO Darren Woods told Trump that legal reforms would be necessary before Venezuela could become an attractive place to invest. Woods expressed substantial doubt about Exxon’s prospects in the country.
Trump rejected that skepticism and suggested he might “keep Exxon out” of the Venezuelan oil expansion he expected to follow.
By May, however, interest from the American energy industry had increased.
Engineers, attorneys and company representatives gathered at the heavily guarded J.W. Marriott in Caracas to present plans for rehabilitating Venezuela’s deteriorated oil fields, according to The Wall Street Journal.
Participants included representatives of major industry interests as well as a small Texas oil operator.
During an earnings call that month, Woods acknowledged that Venezuela had become more open to outside participation. He said Exxon’s experience producing heavy crude in Canada could give the company a particular advantage in Venezuela.
Venezuelan and Canadian crude share characteristics that make extraction, transportation and refining more difficult than lighter grades of oil. Developing those resources requires specialized equipment and technical knowledge that Exxon has gained through its Canadian operations.
The new framework governing private-sector participation addresses some of the legal concerns raised by Woods and other executives earlier in the year.
Iran Conflict Increases Venezuela’s Strategic Value
Venezuela’s changing investment climate is gaining additional significance because of instability in the Middle East and the war involving Iran.
Blockades affecting the Strait of Hormuz pushed oil prices above $100 per barrel before prices returned to prewar levels following a temporary agreement. Renewed hostilities have since raised doubts about whether that arrangement will hold.
The Strait of Hormuz remains central to global petroleum shipments, leaving producers and governments vulnerable to disruptions in the narrow maritime passage.
Even if the United States and Iran eventually reach a lasting peace agreement, interest in oil supplies that do not depend on the strait is expected to remain strong.
Venezuela offers one of the world’s largest potential alternatives, although its ability to regain a leading position in international energy markets remains uncertain.
Its rising production, reduced reliance on PDVSA and broader acceptance of private management have created conditions that could allow the country to become a major supplier again.
American energy companies, after initially questioning whether Venezuela could provide sufficient legal and physical security, now appear increasingly positioned to participate in rebuilding the industry and developing its reserves.
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