Venezuela Suspends 19 Oil Production-Sharing Agreements, Advancing Petroleum Law Reform to Attract Foreign Investment

Venezuela’s government has suspended 19 production-sharing agreements (PSAs) with private oil companies, covering projects in Lake Maracaibo, the Orinoco Belt and several mature oilfields, unnamed sources told Reuters. The agreements are currently under joint review by the Venezuelan and US governments, with some likely to be revoked. The sources stressed that the suspension has not affected Venezuela’s total oil output.

Enterprises involved in the PSAs include those from China, the US, South America and Venezuela itself, which previously collaborated on oilfield development under the agreements. The suspension and review form part of Venezuela’s recent oil sector policy adjustments, aligning with its earlier petroleum law reform.

A month ago, Venezuela’s National Assembly amended the petroleum law, aiming to attract more foreign investment and boost domestic oil industry vitality. Under the revised law, private enterprises may engage in oil operations if they meet relevant criteria: assuming full management responsibilities (including funding, accounting and operational risks), demonstrating financial and technical capability via a business plan approved by Venezuela’s Oil Ministry. Notably, the Venezuelan government retains ownership of all developed resources to safeguard national sovereignty over oil assets.

A key change from the reform is the end of the long-standing monopoly of Venezuela’s state-owned oil giant PDVSA. Foreign operators participating in cooperation will gain control over the production and sale of Venezuelan crude oil — a move widely seen as Venezuela’s key measure to liberalise market access and attract international capital and technology. The reform also establishes a modern dispute resolution mechanism via courts or arbitration, and adjusts relevant tax burdens to enhance operators’ cash flow and further improve investment appeal.

US Energy Secretary Chris Wright stated during his visit to Venezuela earlier this month that the country could earn up to $5 billion from oil sales in the coming months. He revealed that current sales have exceeded $1 billion, with additional $5 billion expected from short-term agreements. Mr Wright also noted that Venezuela’s crude oil and natural gas output is set to rise significantly this year, with current daily crude production standing at around 1 million barrels — part of which comes from projects under the suspended and reviewed PSAs.

Venezuela holds the world’s largest proven oil reserves, but its production capacity has long been underutilised due to ageing infrastructure and insufficient investment. The PSA suspension and review, petroleum law reform, and strengthened energy dialogue with the US are all efforts by Venezuela to revitalise its oil industry and diversify exports. The international market expects Venezuela’s oil output to gradually recover and its energy industry structure to undergo further adjustments as relevant policies are implemented.