SEATTLE (Oil Monster): A proposed reform of Venezuela's oil law is enough to encourage companies working in the country to expand and for some new entrants to begin investing, but deeper reforms would be necessary to attract the $100 billion the U.S. says is required to revamp the nation's energy sector, foreign and local executives and lawyers said.
The U.S. has taken control of Venezuela's oil exports and revenue following a military incursion to capture President Nicolas Maduro earlier this month, and a naval blockade to stop oil shipments on sanctioned vessels since December.
Oil is the Venezuelan government's main source of revenue. Washington has said it plans to control the country's energy resources and revenue indefinitely to ensure Caracas governs in a way that the U.S. considers is in line with its foreign policy targets.
U.S. President Donald Trump is pushing U.S. oil companies to invest massively in the country's dilapidated industry to reverse decades of mismanagement and underinvestment. For many investors, one of the biggest obstacles to secure capital for Venezuela is a long-standing legal framework that gives state-run oil company PDVSA a monopoly on operating projects in the oil and gas sector.
Interim President Delcy Rodriguez proposed a sweeping reform to the hydrocarbon law last week. Venezuela's authorities discussed it on Monday with lawmakers and oil executives from firms including U.S. producer Chevron and India's ONGC, sources close to the talks said. It is expected to be approved on Tuesday after the brief consultations.
Chevron did not reply to a request for comment. ONGC could not immediately be reached for comment after working hours.
The reform would give PDVSA's joint-venture partners more control over projects, direct access to proceeds from oil sales and more flexible operating conditions.
Existing partners - which include Chevron along with European, Chinese and Russian companies - have been requesting those changes for years. PDVSA is currently the majority stakeholder in over 40 joint ventures, after a nationalization two decades ago saw many companies leave the country.
Interim President Delcy Rodriguez proposed a sweeping reform to the hydrocarbon law last week. Venezuela's authorities discussed it on Monday with lawmakers and oil executives from firms including U.S. producer Chevron and India's ONGC, sources close to the talks said. It is expected to be approved on Tuesday after the brief consultations.
Chevron did not reply to a request for comment. ONGC could not immediately be reached for comment after working hours.
The reform would give PDVSA's joint-venture partners more control over projects, direct access to proceeds from oil sales and more flexible operating conditions.
Existing partners - which include Chevron along with European, Chinese and Russian companies - have been requesting those changes for years. PDVSA is currently the majority stakeholder in over 40 joint ventures, after a nationalization two decades ago saw many companies leave the country.
The fast-tracked reform goes some way to ending the monopoly, but some vague language in the proposal, as well as some contradictory clauses on trading and taxation need to be ironed out, industry associations and lawyers said. Otherwise, large international energy companies would have little appetite for investment, they added.
"You got to deal with what you have," said Ali Moshiri, CEO of Amos Global Energy Management, which has stakes in energy projects 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, including current operators."
Courtesy: www.reuters.com
