Venezuela’s oil ministry has suspended 19 oil production-sharing contracts signed under the administration of President Nicolás Maduro, four sources with knowledge of the move told Reuters.
The move appears to be the most sweeping review of private upstream agreements in years.
The contracts — awarded to a mix of Chinese, U.S., South American, Venezuelan, and offshore-registered firms — cover a wide spectrum of assets: recently activated projects in Lake Maracaibo, expansion ventures in the Orinoco Belt, and smaller mature oilfields requiring enhanced recovery techniques. Some of the companies that secured the deals are little known, and several contracts were signed at a time when U.S. sanctions constrained Venezuela’s access to capital and markets.
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For now, the suspension has not disrupted production. State oil company Petróleos de Venezuela SA (PDVSA) continues to market and sell crude from the affected projects while the agreements are under review, according to the sources. Operational continuity suggests authorities are seeking to preserve output while reassessing contractual terms and counterparties.
Sanctions-era contracts under scrutiny
The review comes amid a joint reassessment by Caracas and Washington of contracts executed during the sanctions period. The two governments are examining the credentials of companies that secured production-sharing deals, and may recommend revoking some agreements.
During years of U.S. sanctions, Venezuela struggled to attract major international oil companies back into its upstream sector, particularly after prior waves of expropriations eroded investor confidence. As a result, production-sharing contracts were often signed with smaller or less established firms willing to operate in high-risk conditions. In some cases, companies outsourced field operations to contractors, according to two sources.
Production-sharing contracts were intended to provide a workaround to the traditional joint-venture structure dominated by PDVSA’s majority ownership. Yet the model yielded limited success in drawing large-scale capital. International oil majors largely stayed away, wary of sanctions exposure, legal uncertainty, and payment risks.
The current review coincides with a reform of Venezuela’s hydrocarbon law passed in late January. The revised legislation aims to facilitate foreign investment in a sector that has seen output collapse from more than 2 million barrels per day a decade ago to a fraction of that level in recent years. Under the new law, the government has six months to evaluate existing contracts, providing a formal framework for the suspensions now underway.
Geopolitical shift reshapes oil governance
The contract review also unfolds against an extraordinary geopolitical shift. The United States captured Maduro in January and assumed control of Venezuela’s oil exports and sales. Since then, the U.S. Treasury Department has issued general licenses allowing companies to trade Venezuelan oil and operate in its energy sector, subject to specific clearance from the Office of Foreign Assets Control.
That arrangement has altered the governance of Venezuelan crude flows. With U.S. oversight, the vetting of counterparties has intensified, raising questions about deals signed under opaque circumstances during the sanctions era. The scrutiny of the 19 contracts is therefore not only commercial but political, reflecting a broader attempt to reset the sector’s compliance architecture.
At the same time, PDVSA is in talks with traditional joint-venture partners, including Chevron, Repsol, and Maurel & Prom, to expand output from fields already assigned to them. Those negotiations point to a dual-track strategy: tighten oversight of sanctions-era entrants while deepening collaboration with established operators that have technical expertise and stronger balance sheets.
Investment dilemma and production outlook
The immediate production impact appears limited, but the medium-term implications are significant. Venezuela’s oil infrastructure remains severely degraded after years of underinvestment, mismanagement, and sanctions-related constraints. Reviving output in areas such as the Orinoco Belt — home to vast extra-heavy crude reserves — requires substantial capital, advanced technology, and reliable export logistics.
Suspending contracts may create short-term uncertainty for smaller operators and contractors. However, if the review leads to clearer legal terms and stronger counterparties, it could ultimately strengthen the sector’s investment case. Conversely, abrupt revocations without transparent compensation mechanisms could deter prospective investors at a time when the country urgently needs external capital.
Lake Maracaibo projects, which involve complex redevelopment of aging fields, are particularly sensitive to financing continuity. Any disruption in field services or supply chains could affect incremental production gains.
The reform of the hydrocarbon law suggests policymakers are seeking a more flexible framework capable of attracting fresh capital under revised geopolitical conditions. But energy experts believe that making that ambition a sustained output growth will depend on contract stability, regulatory clarity, and the durability of the new U.S.–Venezuela arrangement governing oil exports.