Driven by chavismo under Delcy Rodríguez, the National Assembly approved, in its first discussion, the partial reform of the Organic Hydrocarbons Law, establishing a significant opening for private participation in primary activities, easing the fiscal regime, and consolidating contractual and mixed company frameworks, while formally maintaining state ownership of the deposits.
Specifically, the legislative tool allows mixed companies and private entities to take over the technical and commercial management of resources by granting them the right to manage foreign currencies in their own accounts. Furthermore, mechanisms are established to lower royalty payments and taxes when the profitability of a project is compromised.
The reform details the mandatory transfer of assets to the Republic upon contract completion, ensuring operational continuity and public asset protection.
What does the partial reform to the Organic Hydrocarbons Law propose?
On January 22, 2026, the chavista National Assembly approved, in its first discussion, the project for the Partial Reform Law of the Organic Hydrocarbons Law.
This legislative instrument consists of 18 articles aimed at redefining its objective to cover the entire hydrocarbon chain, namely exploration, extraction, transportation, refining, industrialization, and commercialization.
The goal of the reform is to strike a balance between state sovereignty and the need to stimulate private investment through greater operational and fiscal flexibility.
Pillars of the partial reform to the Organic Hydrocarbons Law
The Reform Law of the Organic Hydrocarbons Law is based on four fundamental pillars, namely:
Opening to private investment
The execution of primary activities through contracts with domestic private companies is formalized, granting minority partners enhanced powers within mixed companies.
Fiscal flexibility
Mechanisms are introduced to reduce royalties and the Extraction Tax by up to 50%—in some cases from 30% to 15%—to ensure the economic viability of projects.
Legal and operational security
The use of independent arbitration for resolving disputes is authorized, allowing private partners to manage bank accounts in foreign currencies and jurisdictions.
Direct management and commercialization
Operators are empowered to directly market their production, conditioned upon securing prices higher than those set by the state while maintaining strategic public control.
Objectives and guiding principles of the reform
The reform redefines the law’s objective to comprehensively regulate the hydrocarbon value chain—from exploration to commercialization—under a set of updated principles:
Sovereignty and public ownership: the principle of energy sovereignty and public resource ownership is upheld.
Economic efficiency: progressive maximization of revenue and legal security is prioritized.
Transparency and sustainability: contractual transparency, environmental protection, and alignment with energy transition are incorporated as fundamental axes.
Resolution of disputes
The reform proposal includes a critical modification in Article 8 aimed at bolstering investor confidence.
In this regard, it establishes the jurisdiction initially resides with the competent courts of the Republic.
It explicitly admits the use of alternative dispute resolution mechanisms, including mediation and independent arbitration.
Modalities for the exercise of primary activities
Article 23 establishes three legal frameworks for conducting exploration and extraction activities:
Direct: carried out by the National Executive or companies wholly owned by the Republic.
Mixed companies: where the Republic holds a majority stake and controls the equity.
Private contracting: private companies domiciled in Venezuela through contracts signed with state-owned companies or their subsidiaries.
The national government retains the authority to transfer or revoke rights over these activities and over movable or immovable assets necessary for their execution, depending on compliance with obligations by operators.
Strengthening minority participation in mixed companies
Article 36 introduces unprecedented prerogatives for minority shareholders in mixed companies, subject to authorization from the relevant ministry:
Direct commercialization: they can sell all or a portion of the production, provided the price exceeds that obtained by state companies.
Financial management: they have the authority to open and manage bank accounts in any currency and jurisdiction to administer their funds.
Technical management: the possibility of exercising technical and operational management of the company, either directly or through specialized third parties, to ensure international efficiency.
Economic balance: contractual guarantees are provided to ensure financial-economic balance until investment recovery is achieved.
New contracting regime with private companies
The reform bill includes a section dedicated to contracts for developing primary activities, comprising Articles 40 to 45, under the following terms:
Risk and cost: the private operating company assumes complete management at its own cost and risk. It does not generate financial debt for the Republic or its state subsidiaries.
Compensation: it consists of a percentage share of the verified hydrocarbon volumes, which can be sold directly by the operator.
Use of assets: state-owned companies can lease assets and cede operational area usage in exchange for a fee established by contract.
Reversion of assets: upon contract conclusion, all constructed or acquired assets must be transferred to the Republic free from encumbrances and without the right to compensation.
Tax incentives and modifications to royalties
The reform project establishes a tax flexibility regime to ensure the viability of complex projects or those with initially low profitability.
ConceptStandard RateMinimum Limit (private companies/contracts)Minimum Limit (mixed companies)Royalty30 %20 %15 %Extraction Tax33.33 % (1/3)20 %15 %
Regarding the Extraction Tax, the reform proposes that taxpayers can deduct from this tax the amount paid for royalties and special advantages. The Executive may restore original rates (up to 30%) if it is demonstrated that the economic viability of the deposit is maintained with such an increase.
Commercialization and strategic control
Article 64 of the reform stipulates that, although commercialization is primarily the responsibility of state-owned companies, the Executive can exceptionally authorize mixed and private companies to directly market the natural hydrocarbons from their assigned areas.
The conditions for direct commercialization are:
Prices must be higher than those set by the state.
Effective state control over strategic decision-making.
Prohibition on transferring ownership of deposits or creating real guarantees over them.
Causes for contract termination include non-compliance with the marketing plan, significantly low prices compared to the market, impact on internal supply, or fiscal/environmental violations.
Transitional provisions and enforcement
Previous laws from 2006 and 2009 that limited private participation or reserved ancillary services exclusively for the state are repealed.
The full validity of the “Productive Participation Contracts” signed under the Antiblocking Constitutional Law is maintained.
The ministry will evaluate mixed companies established prior to this reform to align them with the new legal framework.
The law takes effect from its publication in the Official Gazette.