Caracas, Venezuela. Venezuela’s oil ministry has suspended 19 oil production-sharing contracts with private companies signed under President Nicolas Maduro, four sources with knowledge of the move told Reuters on Thursday. The sources said the suspension has not affected the country’s oil and gas output so far.
PDVSA sales continue during suspension
The sources said state oil company PDVSA is selling the crude produced under the contracts while they are suspended.
Reviews by Caracas and Washington
Caracas and Washington are expected to review the contracts and may recommend revoking some of them, the sources said. The Venezuelan and US governments are reviewing the credentials of the companies that signed the contracts, the sources added.
Projects covered by the suspended contracts
The contracts under review include projects that recently began producing oil in challenging areas such as Lake Maracaibo, large ventures aiming to expand output in the Orinoco Belt, and small mature oilfields.
Investment hurdles under the contract model
Maduro’s administration had little success securing investment through the production-sharing contract model, as large oil players rejected a return to Venezuela after expropriations or avoided doing business due to US sanctions.
Companies involved and outsourcing arrangements
Companies that took on production-sharing contracts included Chinese, US, South American and Venezuelan firms, as well as some registered in tax haven countries, according to a list seen by Reuters. Some firms obtained contracts in multiple areas, and two sources said some companies outsourced the oilfields to contractors.
US actions and licensing framework
The source text said the United States captured Maduro in January and took control of Venezuela’s oil exports and sales. It also said the US Treasury Department has issued general licenses allowing companies to trade Venezuela’s oil and operate in its oil and gas sectors, while requiring specific clearance by the Treasury’s Office of Foreign Assets Control.
Hydrocarbon law reform and contract review timeline
Venezuela’s National Assembly passed a reform to the hydrocarbon law in late January to facilitate foreign investment in the oil industry. Under the reformed law, the government has six months to review existing contracts.
Requests for comment
Venezuela’s ministries of oil and communications and the White House did not immediately reply to a request for comment.
What impact could the contract review have on private companies operating in Venezuela’s oil sector?
