Venezuela opens oil sector to privatization in sharp break from socialist rule

Venezuela has taken a dramatic step away from two decades of socialist orthodoxy, approving legislation that opens its oil industry to privatization and foreign control, in a move that could reshape the country’s economy and reinsert it into global energy markets.

The National Assembly voted on Thursday to overhaul the nation’s energy law, dismantling rules that had long favoured state-run Petróleos de Venezuela SA and restricted private participation.

The shift comes less than a month after the seizure of then-President Nicolás Maduro in a US military operation in Caracas, a political rupture that has accelerated policy reversals once considered unthinkable.

Private companies to gain more control

The bill now awaits the signature of acting President Delcy Rodríguez, who proposed the reforms shortly after US President Donald Trump said his administration would take control of Venezuela’s oil exports and seek to revive the country’s battered energy sector by attracting foreign investment.

The timing underscores how geopolitics and economic necessity are colliding in one of the world’s most oil-rich yet production-starved nations.

Under the revised framework, private companies would gain control over oil production and sales, a sharp departure from the state-dominated model introduced more than 20 years ago.

The law also allows disputes to be settled through independent arbitration rather than exclusively in Venezuelan courts, which are widely viewed by investors as politicised and lacking independence.

For foreign oil companies, those judicial protections are as significant as the economic incentives. Several major US firms lost billions of dollars in assets when the previous legal regime was imposed, and many have since remained on the sidelines despite Venezuela’s vast reserves.

By permitting international arbitration, the government is signalling an attempt to reduce the risk of future expropriations.

Financial terms of oil extraction revised

The legislation also reshapes the fiscal terms of oil extraction.

It sets a royalty cap of 30% while giving the executive branch flexibility to adjust rates on a project-by-project basis, depending on capital requirements, competitiveness and other factors. Supporters argue the structure is designed to make Venezuelan projects viable again after years of underinvestment and declining output.

Ruling-party lawmaker Orlando Camacho, who heads the assembly’s oil committee, said the reform “will change the country’s economy,” reflecting hopes that new capital inflows could stabilise public finances and reverse the collapse in production that has crippled exports and government revenues.

Yet concerns about governance and corruption remain a central issue for both domestic critics and international investors.

Opposition lawmaker Antonio Ecarri urged lawmakers to add transparency and accountability measures, including a public website detailing funding flows and contracts.

Venezuela’s oil sector has long been plagued by opaque management and allegations of systemic corruption, problems that new investment alone may not solve.

“Let the light shine on in the oil industry,” Ecarri said, arguing that transparency and oversight should be treated as judicial guarantees alongside arbitration rights.

Whether the reforms will succeed in drawing sustained foreign investment remains uncertain.

But the vote marks a historic pivot for Venezuela, signalling that ideological constraints are giving way to economic survival as Caracas seeks to rebuild its oil industry—and its place in the global energy system.

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