Andean Group - February 2026

On 9 January the CEO of US oil firm ExxonMobil, Darren Woods, told President Donald Trump that Venezuela’s oil industry was “uninvestable” and that a major prerequisite for foreign capital would be a new hydrocarbons law. Less than three weeks later that advice became reality. The national assembly unanimously approved a bill that turns the oil and gas industry on its head and would probably cause former president Hugo Chávez (1999-2013), the father of Venezuela’s socialist ‘Bolivarian Revolution’, to roll in his grave.

The hydrocarbon reform that was signed into law by President Delcy Rodríguez on 29 January seeks to unwind a long legacy of state control that dates back much further than Chávez’s presidency. In fact, it winds the clock back to the 1960s, when foreign companies were last allowed to have sole operating rights in oil concessions. Under the new legislation, private oil firms will once again be able to hold oil blocks as either sole operators or in joint ventures.

As a result, the influence of state oil company Petróleos de Venezuela (Pdvsa) is set to wane. Since the 1975 nationalisation of the oil sector, Pdvsa had been legally required to be the leading actor in all oil transactions, a privilege which was expanded when Chávez nationalised foreign oil companies such as Exxon and ConocoPhillips that rejected a restructuring on terms that were even more favourable to Pdvsa.

The reform also reduces the overall tax burden, moves decision-making power from the national assembly to the oil ministry, and allows assets owned by Pdvsa to be transferred or outsourced.

Under the new legislation private companies will gain not only operational control but essentially also the rights to the oil itself. That provides them with the flexibility to sell the oil where and when they want and ensures them revenues that don’t have to go through Pdvsa. In addition, oil assets currently owned and operated by Pdvsa can be transferred to private companies or outsourced to them. This could potentially emaciate the state oil company.

Crucially, the reform allows for international arbitration to resolve contractual disputes, potentially easing one of the key concerns of oil companies which have highlighted Venezuela’s track record of nationalising foreign oil operations or forcing them to restructure in a way that benefits the Venezuelan state. The law also establishes a maximum royalty rate of 30%, with the government having discretion over the rate. According to press reports, royalties will be set at 20% for foreign companies and 15% for public-private partnerships.

“We have achieved unanimous approval for a reform of the hydrocarbons law that will make contracting domestic and foreign companies to extract resources from the world’s largest oil reserve more competitive,” said national assembly president Jorge Rodríguez, who is President Rodríguez’s brother.

Energy sovereignty

Indicative of how President Rodríguez continues to publicly assert Venezuela’s sovereignty while adhering to the demands of the US, she insisted that the law builds upon the legacies of Chávez and his successor Nicolás Maduro (2013-2026), who was extracted in a US military operation at the start of the year. “This law reaffirms sovereignty over our energy resources,” Rodríguez said.

The US eased its sanctions on Venezuela’s oil sector on the same day that the law was approved. Under General Licence No 46 issued by the US Treasury Department’s Office of Foreign Assets Control (Ofac), US companies can lift, sell and transport Venezuelan oil. In early January the US Treasury had already extended licences for traders to export the stock of accumulated sanctioned oil reserves worth some US$3bn. The proceeds would go to US-controlled accounts and benefit the people of both countries, Trump said at the time.

Sanctions were further eased on 10 February when Ofac issued three new general licences that permit US involvement in the provision of goods, technology, software, or services for oil and gas exploration and production; ease restrictions on the use of ports and airports in Venezuela; and permit transactions relating to “the lifting, exportation, reexportation, sale, resale, supply, storage, marketing, purchase, delivery, or transportation of Venezuelan origin oil, including the refining of such oil, by an established US entity”.

But reflective of how the US is now firmly in control of Venezuela’s oil industry, the licences establish strict criteria for the sale of its crude oil. These prohibit sales involving China, Russia, Iran, North Korea, or Cuba; that involve payment terms that are not “commercially reasonable”; or that use debt swaps, gold, or cryptocurrencies as payments. Sanctioned vessels will continue to be prohibited, essentially ruling out the shadow fleet that the Maduro regime had been employing until recently.

Indeed, the bulk of Venezuela’s exports in January went to US refiners along the Gulf coast, not to China as was the case until December. In the first month of the year exports surged to around 800,000 barrels per day (bpd), up from 498,000 bpd in December, according to shipping data cited by Reuters, although part of that was from output that had been stored in tanks and vessels as a result of the US blockade. January exports were roughly in line with the average for last year.

Going forward, the US may end up resuming the 500,000 bpd of Venezuelan crude it imported prior to the imposition of sanctions in 2019. India also looks set to increase its imports as part of a deal struck with the US to reduce Delhi’s purchases of Russian oil. In early February, India’s Reliance Industries reportedly made its first purchase of Venezuelan crude since mid-2025.

De facto privatisation

The diminished role for Pdvsa potentially paves the way for a de facto privatisation of the oil industry. Pdvsa was once considered an island of excellence within a rather corrupt and inefficient system, but under Chávez and Maduro, technocratic staff were replaced by government loyalists and the company’s coffers ransacked to fund spending on priorities such as education and housing. Accountability and transparency have been woefully inadequate, leading to widespread corruption. Already back in 2020, the Venezuelan branch of Transparency International documented cases of fraud or other irregularities within Pdvsa worth over US$40bn. Fake insurance policies, leaky oil tankers, and machinery that was dismantled and sold meant that Pdvsa was in no condition to spearhead a swift revival of Venezuela’s oil industry.

But that raises a host of questions regarding the future of Pdvsa. Where will it get the money to invest in much-needed repairs and maintenance, much less for expansion projects? How will the domestic supply of fuel be ensured?

On 9 February the Amuay refinery, the country’s largest, was shut down due to a power blackout. Disruptions of this sort are frequent and mean the refinery is operating well below its capacity of 645,000 bpd. Automotive fuel has been in short supply, frequently leading to long queues at petrol stations throughout the country.

President Rodríguez has said that revenues from the sale of oil and gas will go to two sovereign wealth funds, one to improve public welfare and one to invest in infrastructure. In an effort to increase transparency, the government will publish real-time data on where and how the money is being spent, she says.

While such moves may help Rodríguez build some public support, there are still huge issues regarding the legitimacy of her government and the role of the opposition. In a telling turn of events, until Maduro’s capture Washington was describing the Chavista regime as illegitimate and was backing the opposition. Now the situation seems to be reversed, with the Trump administration doing business with the regime and the opposition isolated.