Venezuela’s legislature moved this week to open the country’s oil sector to the private sector for the first time in nearly two decades, sending a reform bill for further debate that would formally allow external companies to explore, produce and market crude in parts of the country’s vast hydrocarbon basin.
The initial approval last week in the National Assembly marks a significant change in policy for the OPEC member, where state control through Petróleos de Venezuela SA (PDVSA) has dominated since nationalisation in the 1970s and was reinforced under Hugo Chávez in the early 2000s.
The reform is part of broader efforts by the interim government to revive output and attract foreign capital.
Legislature Advances Oil Sector Reform
On Jan. 22, Venezuela’s legislature advanced a bill to loosen state control over oil operations, giving private companies more latitude to operate oil fields and sell their output under new contractual frameworks.
The proposed legislation would permit private investors to manage extraction activities and commercialize crude once government obligations are met, a departure from the traditional model in which PDVSA maintained majority control.
It passed its first reading and now awaits further debate and approval.
The government formally submitted the proposed reform to the Organic Law of Hydrocarbons earlier in January, aiming to align the legal code with mechanisms introduced under the Anti-Blockade Law that were designed to circumvent sanctions and attract investment.
Shift From State Control
For decades PDVSA has controlled Venezuela’s oil industry, which accounts for a large share of government revenue.
Under Chávez and his successor, Nicolás Maduro, foreign oil firms saw assets expropriated and were required to operate through joint ventures with PDVSA holding controlling stakes.
The new reform could alter that structure by broadening how contracts are structured, including potential production participation agreements.
Industry Context and Production Challenges
The reform comes as Venezuela struggles to restore crude output that has languished well below historical levels.
The country, which sits atop the world’s largest proven oil reserves, has seen production decline due to underinvestment, infrastructure decay and sanctions, leaving output far below its potential.
A recent analysis suggests that with stable legal, fiscal and political conditions, production could rebound to 1.5 million barrels per day by 2028 and potentially approach 3 million by 2035, though this depends on sustained investment and reform.
International energy companies have maintained a limited presence in Venezuela despite years of sanctions and political risk.
Firms such as Chevron, Eni and Repsol continue operations under constrained conditions, focusing on asset maintenance and selective growth.
Domestic and Global Impacts
Proponents of the reform argue broader private participation is essential to attracting the capital needed to modernise aging infrastructure and expand development into underexplored basins.
Critics caution that Venezuela must offer legal certainty and strong investor protections if it hopes to overcome historic deterrents to foreign investment.
The draft reform also proposes mechanisms for dispute resolution through international arbitration, and adjustments to royalty and tax regimes, which actors in the energy sector say are critical to catalysing long-term commitments.
