Leroy N. Soetoro
2019-03-20 02:44:01 UTC
To Guaido, the self-declared interim president seeking to oust President
Nicolas Maduro, the proposal is vital to reverse the collapse of the OPEC-
member nations oil industry.
Oil provides 90 percent of Venezuelas export revenue, and such a move
could win Guaido support among foreign energy companies to help finance a
desperately-needed rebuilding, after crude production has fallen to a
We need to change the current framework ... we need to open up the oil
industry to private investment, said Ricardo Hausmann, Guaidos delegate
to the Inter-American Development Bank. Speaking at an energy conference
in Houston, Hausmann said that PDVSAs role had to be limited due to its
operational and financial weakness.
Neither PDVSA nor the Information Ministry replied to a request for
The proposal could provide ammunition for Maduros claims that Guaido is a
puppet for foreign interests, but is unlikely to damage widespread support
for the opposition leader, with many Venezuelans tired of years of
shortages and hyperinflation.
However, the plans impact will remain symbolic as long as Maduro remains
in power. Despite being disavowed by 50 governments who recognize Guaido
as the countrys legitimate leader, Maduro continues to control
Venezuelas military and its oilfields.
Under the proposal, which is expected to be released and discussed at
Venezuelas National Assembly in coming days, private firms could choose
to run the day-to-day operations of Venezuelan oilfields, a sharp
departure from the Chavez era in which foreign companies could only hold
minority stakes and were not granted operational control.
PDVSA would continue as a main player but some of its assets would be
transferred and auctioned off by an independent regulator, in a manner
similar to Mexicos energy reforms, which ended a 75-year monopoly.
The Venezuelan oil industry has collapsed after years of arbitrary
policies that turned PDVSA and its subsidiaries into political tools
serving the Socialist model, according to the preamble to the law.
Guaidos team is proposing a variety of exploration and production
contracts to allow private companies for the first time in decades to
operate oilfields individually and in partnership with PDVSA. Private
companies could also apply to operate oil refineries and retail service
stations under the draft proposal.
U.S. National Security Adviser John Bolton, who has urged Maduro to
resign, had called for opening the energy industry to foreign operators.
It will make a big difference to the United States economically if we
could have American oil companies invest in and produce the oil
capabilities in Venezuela, he told Fox News in late January.
The new contracts would be awarded by a new regulator, named the National
Hydrocarbon Agency, which would organize a round zero and let PDVSA pick
its preferred oilfields.
All hydrocarbon reservoirs can be part of an auction to be decided by
Venezuelas Hydrocarbon Agency, the draft says.
Once the law is approved, there would be additional legislation to come
for regulating specific aspects of the oil business, according to the
Venezuelas current energy law, the backbone of an economy dependent on
oil revenue, was approved by Chavez in 2001 under a legislative power
granted to him by the congress, and was later revised to increase taxation
and the governments control over the industry.
More than a decade ago, Chavez used the law to force foreign partners to
enter into joint ventures controlled by PDVSA, following a lengthy oil
industry strike against his government.
Chavez began a wave of nationalizations that led ConocoPhillips and Exxon
Mobil Corp to leave the country and later win billions of dollars in
international arbitration claims.
The new proposed law would impose a flexible royalty rate with a minimum
of 16.67 percent and maximum of 30 percent, depending on oil prices,
removing shadow taxes that increase payments. At present, companies
including Chevron Corp are compensated through dividends paid by PDVSA.
It would be a step backwards, it would not live up to what Chavez left
the workers, which is a company thats free, a nationalized company, said
Luis Rojas, head of an oil workers union who works at a heavy oil project
in the east of the country.
PDVSA under the legislation would remain a constitutionally-created state-
run oil company, but would no longer be required to be in all oil ventures
It is impossible to rescue the Venezuelan oil industry, to rescue the
Venezuelan economy without the private sector, said opposition-linked
union leader Ivan Freites, who participated in discussions surrounding the
Guaido proposal. We are going to turn Venezuela into the country that
recovers faster than any other in history. How are we going to do that?
The draft legislation also includes temporary dispositions allowing the
government to declare the oil industry in emergency, so it can take
control, inspect and audit PDVSAs assets and facilities, and identify
corruption and wrongdoing.
It also allows debt renegotiations, suspension of harmful contracts,
PDVSAs corporate reorganization and negotiations with its current
partners to modify joint ventures if agreed by all the parties.
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