Key Points
- Venezuela is proposing a major reform of its oil laws to attract foreign investment.
- The reforms would give private companies more control over projects and a bigger share of profits.
- The move comes as the U.S. is pushing American companies to invest in Venezuela.
- Many executives and lawyers say the reforms don’t go far enough to attract the necessary investment.
Venezuela is proposing a major overhaul of its oil laws in an effort to attract the foreign investment it desperately needs to rebuild its shattered energy sector. The proposed reforms, which are expected to be approved this week, would give private companies more control over their projects and a bigger share of the profits.
The move comes as the U.S. has taken control of Venezuela’s oil exports and is pushing American companies to invest in the country. The U.S. says it will take $100 billion to get Venezuela’s oil industry back on its feet after decades of mismanagement and underinvestment.
One of the biggest obstacles for foreign investors has been the country’s legal framework, which gives the state-run oil company, PDVSA, a monopoly on all projects. The new reforms would chip away at that monopoly, giving PDVSA’s joint-venture partners more autonomy.
The changes would also lower royalty rates, which are currently among the highest in Latin America, and allow for independent arbitration to resolve disputes.
However, many foreign and local executives and lawyers say the proposed reforms don’t go far enough. They are worried about some vague language in the proposal and are calling for bigger changes, including a reform of the country’s income tax law.
“You got to deal with what you have,” said one CEO of an energy management company with stakes in Venezuela. “There is no option other than this… If you don’t make this (industry) more attractive, the entire progress we want to make is going to come to a halt.”
For now, the proposed reforms are a step in the right direction, but it remains to be seen if they will be enough to convince large international oil companies to pour the billions of dollars needed to bring Venezuela’s oil industry back from the brink.
