Caracas, Venezuela — Venezuela’s National Assembly has taken a decisive step toward reshaping the country’s oil industry, advancing a bill that would loosen state control and significantly expand the role of private and foreign companies. If enacted, the reform would mark the most substantial overhaul of Venezuela’s oil framework in nearly two decades and signal a clear departure—though not a complete break—from the nationalist model established under former president Hugo Chávez.
The proposed reform of the Hydrocarbons Law was approved in its first reading on Thursday, despite the opposition’s refusal to participate in the vote. Opposition lawmakers argued that they were given insufficient time to review the bill, which was made public only hours before it was introduced for debate. They warned that legislation governing the world’s largest proven oil reserves should be treated as a “social pact” requiring broad consultation, not rushed through parliament amid political turbulence.
The bill’s advance comes amid extraordinary political circumstances. It was introduced in the wake of the January 3 abduction of President Nicolás Maduro by the United States, an event that has upended Venezuela’s domestic politics and reshaped its international energy relationships. Within days, Washington signalled a dramatic shift in policy, culminating in the announcement of a sweeping $500bn energy agreement between the two countries.
Under that agreement, the United States—represented by the White House and Energy Secretary Chris Wright—aims to play a central role in the reactivation and restructuring of Venezuela’s oil industry, which has been battered by years of mismanagement, sanctions, and underinvestment. The proposed legal reform is widely seen as a cornerstone of that emerging partnership.
Breaking with the Chávez model
At its core, the bill challenges several pillars of the oil nationalisation implemented by Chávez in 2006, which consolidated state control over the sector and granted exclusive crude marketing rights to Petróleos de Venezuela (PDVSA), the state-owned oil company.
The new text removes PDVSA’s monopoly over commercialisation, allowing private companies to directly market the crude they produce. It also permits oil companies to open bank accounts in any currency and in any jurisdiction, a provision aimed at easing financial operations and reducing exposure to sanctions-related risks.
While the reform formally maintains PDVSA’s majority ownership in joint ventures, it introduces a significant change by allowing minority partners to assume technical and operational control of projects. This shift would give private companies greater autonomy over production decisions, investment strategies, and day-to-day operations—an arrangement that closely resembles models used elsewhere in the region.
Another major provision would repeal the law that reserves ancillary services tied to primary oil activities for the state. Under the proposed framework, private firms could subcontract drilling, extraction, and related services, provided they assume the associated costs and risks.
The bill also seeks to make Venezuela more attractive to investors by introducing flexibility in royalty payments. Instead of a fixed 30 percent royalty on extracted crude, the reform would allow rates as low as 15 percent, particularly for projects involving new drilling in undeveloped or high-risk fields.
Supporters argue that such incentives are essential to revive an industry whose output has fallen dramatically over the past decade due to lack of investment, aging infrastructure, and the exodus of skilled labour.
The reform also introduces legal safeguards intended to reassure foreign investors wary of Venezuela’s track record. These include provisions for independent dispute resolution through mechanisms such as mediation and international arbitration.
Legal certainty has been a key demand of multinational oil companies, many of which remain entangled in long-running disputes with the Venezuelan state. During a January 9 meeting with US President Donald Trump, executives from several major energy firms raised concerns about multibillion-dollar claims filed by ExxonMobil and ConocoPhillips following Venezuela’s nationalisation of oil assets in 2007.
Opposition backlash and procedural concerns
Despite the scale of the proposed changes, the bill’s introduction was marked by controversy. Opposition lawmakers declined to vote, citing the lack of transparency surrounding the drafting process and the absence of prior consultation.
They argued that energy legislation in a country so heavily dependent on oil revenues should not be rushed through parliament, particularly at a time of profound political uncertainty.
“This should be a national conversation,” one opposition legislator said during the session. “Oil policy affects every Venezuelan, and it cannot be rewritten behind closed doors.”
The government, however, defended the expedited process, arguing that urgent action is needed to stabilise the economy and capitalise on the easing of US sanctions.
A law of ambiguity?
For some analysts, the reform represents progress—but one tempered by caution.
José Guerra, an economist and former director of research at Venezuela’s Central Bank, described the proposal as heavy on rhetoric and light on clarity. He said the bill stops short of explicitly allowing private companies to hold majority ownership in oil projects, leaving critical questions unanswered.
“This is a law of ambiguity,” Guerra said. “It is designed to avoid openly breaking with Chávez’s oil legacy. It is not emphatic about private participation.”
Guerra noted that, in practice, the government has already moved well beyond the limits set by the existing Hydrocarbons Law. Over the past year, authorities have increasingly relied on production participation contracts (CPPs), under which private firms can effectively control more than 50 percent of production.
The CPP framework was introduced in 2024, when Delcy Rodríguez served as energy and oil minister. Its operation has been marked by a high degree of opacity, as it is protected by Article 37 of the Anti-Blockade Law—a statute enacted to bypass sanctions imposed on PDVSA in 2019.
That provision allows the government to classify contracts and documents, effectively sidestepping the Hydrocarbons Law, which restricts private and foreign capital to minority stakes in joint ventures led by PDVSA.
On January 15, Rodríguez told lawmakers that the introduction of CPPs had already produced tangible results. According to official figures, oil production rebounded from around 900,000 barrels per day to 1.2 million bpd, while investment under the CPP model reached nearly $900m in 2025.
The ‘Chevron model’
Other experts see the reform as an attempt to formalise what has already been happening behind the scenes.
Luis Oliveros, dean of the Faculty of Economic Sciences at Caracas’s Metropolitan University, described the bill as a positive step that codifies what is often referred to as the “Chevron model”—named after the US oil major’s operations in Venezuela.
“It opens space for foreign companies to assume technical, operational, and financial management of the joint ventures they operate,” Oliveros said. “That flexibility is crucial.”
However, he added that the reform falls short of what many investors are seeking. Eliminating PDVSA’s mandatory majority stake, he said, would have made Venezuela far more attractive to international capital.
Oswaldo Felizzola, coordinator of Venezuela’s International Centre for Energy and Environment (CIEA), offered a similar assessment. He told Al Jazeera that while the reform contains enough elements to draw in new investment, it does not go far enough.
“What has been proposed is necessary, but not sufficient,” Felizzola said. “The law needs to be updated for the 21st century.”
He argued that although the bill reduces the statist rigidity that has paralysed the industry, it fails to address broader structural challenges, including climate change and the global energy transition.
“It does not take into account current or future issues,” he said. “As a result, it is not a law that defines the role of oil in the years ahead.”
Felizzola noted that many existing operators could improve profitability under the new framework by shifting to different operating models. Still, he warned that deeper reforms would eventually be required.
“The conditions are closer to what Venezuela had in the final quarter of the 20th century,” he said. “Are further reforms needed? Yes. But there is now at least something workable—and permission from the state to make it work.”
What comes next
The bill now moves into a consultation phase, followed by a second, article-by-article debate in the National Assembly. Lawmakers have not indicated when that process will conclude, though government officials have suggested they want the reform enacted as quickly as possible.
Meanwhile, the warming of energy ties with Washington is already producing economic effects. This week, Venezuela received its first $300m in proceeds from crude sales to the United States, funds that authorities say will be used to stabilise the foreign exchange market.
For Guerra, these developments underscore a broader shift.
“We are witnessing a turning point,” he said. “The Rodríguez–Trump pact is clearly being implemented, and oil revenues are already flowing.”
He noted that the easing of sanctions allows Venezuela to sell its crude at market prices rather than at steep discounts, as it has done in recent years. As a result, he estimates that oil revenues in 2026 could rise by at least 30 percent compared with the previous year.
Whether the proposed reform will deliver lasting change remains uncertain. But for the first time in years, Venezuela’s oil industry—long constrained by ideology, isolation, and decay—is being reshaped in full view of the world.
