Venezuela to rearrange hydrocarbon sector

Even though the Organic Law on Hydrocarbons was not supposed to be retroactive, private corporations were forced to enter into joint ventures where the Venezuelan State holds a majority stake

When President Hugo Chavez was sworn in last January -following his re-election for a second term, he suggested that changes to Article 303, Venezuelan Constitution, were intended to expand the State’s reserve over the domestic hydrocarbons sector. However, such proposed changes were subsequently drafted with a view to rearrange such reserve.
On the one side, under President Chavez’ proposed changes to the Constitution, the State has a reserve over the gas sector. Such a reserve was not provided for under Article 303, 1999 Constitution. Further, the new article replaces the word “activity” with the word “exploitation,” thus suggesting that some hydrocarbon-related activities will not be reserved to the State, as long as the Organic Law on Hydrocarbons and the Organic La won Gas Hydrocarbons are not modified. These regulations are expected to be reformed through President Chavez’ special ruling powers.

The State reserve over oil activities has been stipulated in the Venezuelan Constitution since 1961. While such provision has remained unchanged thus far, it has not prevented the Venezuelan State from implementing oil policies such as nationalization in the 1970’s -which was accompanied by the organization of state oil holding Pdvsa in 1976- and the oil opening process in the 1990’s, which allowed private firms to play a role in businesses such as operational agreements, strategic partnerships in heavy-crude oil Orinoco Oil Belt, and shared risk and profit exploration agreements.

All of these operations were possible thanks to the enactment and modification of the sector-related laws, namely, the 1943 Law on Hydrocarbons, the 1971 Reversion Law, the 1973 Law on Nationalization, and the Organic Law on Hydrocarbons, enacted in 2001 and currently in force.

El Universal