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OilMonster

Crude Oil August 16, 2019 01:30:44 AM

Venezuela’s Congress to Consider New, Scaled-Back Oil Reform

Anil
Mathews
OilMonster Author
The draft lacks several elements of a prior reform that Guaido’s representatives presented to industry executives in Houston this year.
Venezuela’s Congress to Consider New, Scaled-Back Oil Reform

SEATTLE (Oil Monster): Venezuela’s opposition-controlled congress is considering reforms to the country’s oil law that would open up the sector to private investment but are scaled back from the sweeping changes outlined in a past proposal, according to a draft of the bill seen by Reuters.

The proposal would allow private companies to hold majority stakes in upstream joint ventures with state oil company PDVSA, with the ability to directly export crude. The changes address issues that have limited companies’ profitability since late President Hugo Chavez created the joint venture model in 2007.

Even if the proposal were approved by congress it would have little immediate impact, given that President Nicolas Maduro considers its rulings null and void and has created a parallel legislative body friendly to the government. He retains control of state functions, including PDVSA.

But it nonetheless provides a glimpse as to what policies opposition leader Juan Guaido would pursue to lure back foreign companies and raise Venezuela’s flagging oil production should he succeed in his months-long quest to oust Maduro.

Elias Matta, an opposition lawmaker who chairs the congress energy and oil commission, called the proposal a “working paper” of “quick reforms” during a meeting of the commission last week.

The draft lacks several elements of a prior reform that Guaido’s representatives presented to industry executives in Houston this year.

Unlike that version, the new proposal does not create an independent regulator to oversee auctions for concessions. It also keeps current royalty levels for crude, and creates a minimum local content requirement of 25 percent by 2028 - a big win for Venezuelan engineering and contracting companies.

The previous proposal had been presented to the energy and oil commission in early June. But Luis Stefanelli, a member of the commission from Guaido’s Popular Will party, said in a telephone interview they decided to introduce a limited reform that would be easy to pass quickly rather than try to pass a new law that would have generated debate and taken time to build consensus.

The changes suggest the opposition would not open the sector as widely as major reforms in the past decade in other countries in the region like Mexico and Brazil, though lawmakers said the draft was subject to change and a further-reaching reform could be introduced in the future.

“Due to the disastrous collapse in the oil industry, we think we need to flexibilize the law to allow for greater participation from the private sector,” Matta said at last week’s meeting.

Courtesy: www.reuters.com

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