Venezuela Overhauls Oil Laws, Throws Open Doors to Foreign Investment

CARACAS, Jan. 30 — Venezuela's National Assembly voted unanimously Thursday to significantly relax state control over its oil sector, enacting reforms designed to attract desperately needed foreign investment into the backbone of its economy. The move marks the most substantial liberalization of the industry in over two decades.

Lawmakers employed a "parliamentary urgency" procedure to fast-track the bill, which amends the Organic Hydrocarbons Law, after just one week of debate. The legislation aims to reverse years of production decline by creating more favorable terms for private and international companies in exploration and production.

"This is a historic day for our people and for the Venezuelan oil industry," said National Assembly President Jorge Rodríguez in a post on X. "With this reform, oil production in Venezuela will surge." Interim President Delcy Rodríguez, who signed the bill into law, echoed the sentiment, stating it would ensure the nation's vast oil reserves "finally and forever be the happiness of our people."

The reform preserves the constitutional mandate for the state to hold at least a 50% stake in joint ventures but introduces flexible contract models like Production Participation Agreements. These allow private investors to shoulder risks and recover costs through a share of production without owning the resource. Royalty rates, typically set at 30%, can now be reduced to 20% for private contracts and as low as 15% for joint ventures in economically challenging projects, according to analyses by local outlet Efecto Cocuyo.

However, the move has not been without controversy. Opposition lawmaker Antonio Ecarri issued a sharp warning, arguing the reform dangerously concentrates regulatory, contractual, and economic powers within the hydrocarbons ministry. "The text keeps intact the tumor of administrative discretion," Ecarri contended during the session. "It is not a matter of names but of design; discretion causes harm... The law creates a new oil czar." His objections were overruled by the ruling majority.

The legislative action follows significant geopolitical shifts. Weeks after the capture of former leader Nicolás Maduro, the U.S. has signaled strong support for revitalizing Venezuela's oil sector. In a complementary step, the U.S. Treasury issued General License 46, authorizing broad transactions with the Venezuelan government and state oil company PDVSA for the marketing and transport of oil. The license prohibits dealings with entities linked to Russia, Iran, North Korea, or Cuba. Additionally, the U.S. lifted air travel restrictions, with American Airlines announcing plans to resume direct flights.

"This law will change the country's economy; it will be a pillar of transformation for Venezuela's future," said ruling party lawmaker Orlando Camacho prior to the vote. Officials project foreign investment could reach $1.4 billion next year, up from an estimated $900 million in 2025.

Reaction & Analysis

Carlos Mendez, Energy Analyst at Caracas Consultancy Group: "This is a necessary, if overdue, corrective measure. The old model of absolute state control strangled investment and technical expertise. The new contract flexibility and royalty adjustments are pragmatic. The real test will be whether the legal framework is applied transparently to rebuild investor trust."

Isabella Fuentes, Economist at Latin American Strategic Partners: "The potential is enormous, but the risks are equally high. While attracting capital is urgent, the critique about centralized power is valid. Strengthening independent oversight institutions is crucial to prevent corruption and ensure revenues actually benefit the population, as Washington hopes."

Miguel Rojas, Former PDVSA Engineer (Laid off in 2018): "Happy for our people? This is a fire sale! After decades of claiming oil sovereignty, they're now handing over the keys to foreign corporations under the guise of 'recovery.' The 'super minister' will pick winners and losers. This doesn't empower Venezuelans; it empowers a new elite and their foreign partners. We've seen this story before."

Sarah Chen, Managing Director, Global Emerging Markets Fund: "The combination of legislative reform and U.S. license removal is a powerful signal. It opens a calculated, albeit cautious, entry point for institutional investors. The royalty flexibility is key for making heavy oil projects in the Orinoco Belt financially viable again. We are closely monitoring the first contract awards."