PDVSA, Venezuela’s state oil company, presented a contract model for energy companies interested in operating in the country, in an important step to try to reactivate oil production.
The document establishes the conditions for PDVSA to work with companies to recover oil wells, drill new areas and commercialize production. The state-owned company began sharing the contract model at the end of last week with sector executives, consultants and other members of the industry.
According to people in the sector familiar with the document, who requested anonymity because it is confidential information, the model probably represents a more rigid initial position by PDVSA in the negotiations.
Oil companies that already have preliminary production agreements with PDVSA have been waiting for weeks for the definition of this contractual framework to begin formal negotiations. However, as lawyers and consultants analyze the 90-page document, industry reaction indicates that turning the agreements into operating contracts may take longer than expected.
A more investor-friendly joint venture model, created from the historic 2022 agreement between PDVSA and Chevron, had fueled expectations in the sector that Venezuela would leave behind its history of natural resource nationalism and begin to encourage more foreign investment after years of harsh sanctions. However, the new operating contract favors the Venezuelan government, especially on issues such as arbitration, taxes and contract termination, in addition to circumventing United States sanctions rules, according to people familiar with the document.
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In the event of a contractual dispute, the text provides for mediation by the International Organization for Mediation, based in Hong Kong. If there is no agreement, the dispute would be referred to an arbitration court in Paris, administered by the International Office of the Permanent Court of Arbitration.
The arbitration clause contradicts US Treasury Department licenses governing Venezuela sanctions relief promoted by the Trump administration since the beginning of the year, as US rules require agreements to be governed by US law and arbitration.
The contract also establishes that Venezuela can unilaterally terminate an agreement if any person linked to the operating company participates in “acts of political destabilization”, providing for limited compensation if the contract is unilaterally canceled for “reasons of public interest” in the first six years.
Another clause grants broad freedom to the State to define taxes and royalties. Although complaints about tax conditions are common in the oil sector, in the Venezuelan case commercial interests are mixed with broader political and economic issues, as the Trump administration seeks to accelerate investment in a country that has some of the largest oil and gas reserves in the world.
The document is signed by the president of PDVSA, Héctor Obregón, a remnant of Nicolás Maduro’s government and the target of international sanctions.
Neither PDVSA nor the Venezuelan Ministry of Information responded to requests for comment. The US Treasury Department also did not respond.
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The PDVSA framework agreement comes at a time of rising oil prices and increasing internal pressure on the US-backed Venezuelan government, coming from nationalist groups remaining from the former Maduro regime, captured by US forces in January.
