Venezuelan legislators have voted for an updated oil industry law that the country’s leadership hopes will bring in much-needed foreign investment to reverse a decline resulting from mismanagement and U.S. sanctions.
Acting President Delcy Rodriguez signed the new law late on Thursday, the AP reported, hours after the parliament voted in favor of it, and on the heels of news that the U.S. has lifted some of the sanctions against Venezuela’s oil industry in a bid to entice energy companies to consider investing in the country.
It was Delcy Rodriguez who first proposed the legislative changes for Venezuela’s most important industry, earlier this month, amid the U.S. pressure campaign. Per the changes, private companies will be given control over the production and marketing of Venezuelan oil, which effectively means an end to PDVSA’s monopoly over the country’s oil wealth. Private companies will also bear the costs of developing Venezuelan oil resources.
Per the new law, private companies “will assume full management of the activities at its own expense, account, and risk, after demonstrating its financial and technical capacity through a business plan” that will be subject to approval by the Venezuelan oil ministry. The ownership of the resources to be developed by private companies, however, will remain with the Venezuelan state.
The new law also caps royalty rates at 30% but allows the government to set individual royalty rates for projects based on factors such as investment needs and competitiveness.
Another important change from the old law is that now private companies will be allowed to take any disputes with the state to independent arbitration courts. The AP notes that this was among the biggest concerns of energy companies since the old law mandated that disputes be brought to Venezuelan courts, which are under the control of the ruling party.
By Charles Kennedy for Oilprice.com
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