Venezuela oil sector opens gate to private firms under new law, weeks after Maduro's capture by Trump admin

Venezuelan acting President Rodríguez signed the bill just two hours after it was approved by the National Assembly.

Venezuela’s oil industry is set to go through a major overhaul as its acting President Delcy Rodríguez signed on Thursday a law that will open the gates for private firms to engage in the country's oil sector operations, in a move which is far more than just policy change but a reversal of the social movement that has long controlled natural resources in the Caribbean country.

Under the new law, the firms can take disputes and disagreements to independent arbitration and would not be mandatorily required to resolve them only in state-owned Venezuelan courts. (File Photo/REUTERS)

Venezuela is home to some of the world’s largest oil reserves. The newly-signed law, which would be a signature policy under Rodríguez’ regime, would help attract foreign investments that could revitalize the country’s oil sector.

The move comes less than a month after Venezuelan President Nicolas Maduro was captured from capital Caracas by United States forces in a sophisticated military operation, following which, Rodríguez took charge as the country’s acting President.

Rodríguez spoke to Trump before signing the law

Rodríguez signed the bill just two hours after it was approved by the National Assembly. A day before, on Thursday, she also spoke with United States President Donald Trump and Secretary of State Marco Rubio, who had explained to US senators just a day earlier about how America plans to handle the Venezuelan oil’s sale and its money flow, reported news agency Associated Press.

Rodríguez called the policy shift a move towards the future. “We’re talking about the future. We are talking about the country that we are going to give to our children,” she said.

The changes to Venezuela’s oil sector were proposed by Rodríguez earlier in January after Trump had asserted that the country’s oil exports would be handled by his administration.

Venezuelan oil production to be controlled by private firms

So far, Venezuela’s oil production and sale was handled by the state-owned Petróleos de Venezuela SA, which had monopoly over the sector. However, under the new law, private firms will step in to take over that role, along with pricing of the oil.

The law states that a private company “will assume full management of the activities at its own expense, account, and risk, after demonstrating its financial and technical capacity through a business plan approved by” the nation’s Oil Ministry, said the AP report. However, the oil and gas reserves will still belong to the state, even though private firms would be allowed to carry out other activities in them.

Under the new law, the firms can take disputes and disagreements to independent arbitration and would not be mandatorily required to resolve them only in state-owned Venezuelan courts.

The law also changes how much tax companies would have to pay to extract oil by setting a maximum royalty rate of 30 per cent and allows the government to adjust the exact rate for each project based on several factors such as capital investment needs, competitiveness, and more.

The law governing the oil sector of Venezuela was last changed around two decades ago under Hugo Chávez’ regime.

(With inputs from AP)