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The oil reforms proposed by Venezuela’s opposition party led by Juan Guaido—the president that the United States and other countries have recognized—have been scaled back, according to a draft bill seen by Reuters.
The reforms, which previously marked a drastic shift from the current law, are now more sober, but still will encourage private investments into the country’s oil sector.
The new proposal, according to the draft, would still enable private companies to hold majority stakes in upstream JVs with PDVSA, and they will still be able to export oil from those JVs.
The proposal that seeks to encourage foreign investment in getting its vast oil riches out of the ground and to market is a critical step for Venezuela, who has for years antagonized foreign oil companies by seizing assets and reneging on contracts that dates back to the Hugo Chavez administration.
The scaled-back version does not include a provision for an independent regulation to oversee oil auctions.
The reason for scaling back the otherwise sweeping reforms was to get the bill passed more quickly than what would have been possible with more aggressive changes.
Venezuela’s oil industry has suffered at its own corrupt hands—suffering which is exacerbated with each increase in sanctions against it, levied by the United States in an effort to oust Nicolas Maduro from power. Venezuela’s refineries are essentially producing nothing, and its oil production has fallen to well under 1 million barrels per day. And it’s set to fall even more as the latest round of sanctions call out any company doing business with PDVSA—even foreign ones—lest their US assets be seized. For the foreign oil companies that are still in Venezuela, this means perilous times are ahead. For Venezuela’s oil industry, it could spell doom.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.