Elisabeth Eljuri on Venezuela’s Draft Hydrocarbons Law: Ten Key Takeaways

"This law is only one part of the equation, albeit an important one."
 

Venezuela enters 2026 with the world’s largest proven oil reserves and an opportunity to reassess the legal framework governing its oil sector. Despite ongoing institutional and operational constraints, the government’s draft amendment to the Hydrocarbons Law has prompted renewed attention to how legal reform could support investment, risk allocation, and a gradual recovery of the industry.

Against this backdrop, international energy expert Elisabeth Eljuri offers a critical assessment of the draft oil law and its implications for Venezuela’s energy future from an international oil and gas perspective, with her background as a Venezuelan lawyer. She begins with an important disclaimer: commenting on a draft law that partially amends a single piece of legislation, in isolation, is inherently myopic and risks overlooking the country’s deeper structural challenges (as discussed in her January 5 analysis on the rule of law and the proposed new framework). More importantly, nothing in Venezuela’s domestic legal system prevents the legislature from amending this same law again in the future. As a result, the draft offers no legal or fiscal "stability" to protect the high-capex investments required to rebuild the Venezuelan oil industry, at least as stability is understood in lex petrolea. While certain protections exist within the current treaty framework, they remain limited in scope and application.

Eljuri maintains that this amendment must form part of a broader package of reforms aimed at restoring the rule of law, ensuring the independence of political branches—including the judiciary—creating investor confidence, providing more permanent solutions, and incorporating international commitments. In her view, the draft law is only one part of the equation, albeit an important one.

With those caveats in mind, Eljuri outlines ten high-level observations drawn from a focused review of the draft law:

1. Not a comprehensive reform
She would have preferred to see an integral reform rather than a piecemeal, "Band-Aid" approach. Partial reforms rarely provide a solid framework. On the positive side, the draft introduces a new form of investment and reduces the government take under certain circumstances. However, it does not establish an independent industry regulator—generally considered best practice—nor does it address how new projects will be awarded transparently.

2. Excessive executive discretion
The draft grants broad discretion to the Executive Power (EP), increasing non-transparency or, at a minimum, legal uncertainty. There are many examples where that discretion appears (government take reductions, approval of marketing rights and arbitration).  For instance, it does not provide a clear path to final and binding international arbitration seated outside Venezuela. Instead, it leaves to the EP the choice between Venezuelan courts or "independent arbitration," which is neither necessarily institutional nor international. This omission is material.

3. Only one new granting instrument
The draft provides for a single new granting instrument, in addition to the mixed companies. States typically rely on three main models: concessions or licenses, production sharing contracts (PSCs), and risk sharing contracts (RSCs). Under PSCs and RSCs, investors contract with the national oil company rather than receiving a direct exploration and production rights. Based on its characteristics, the "contract" contemplated in the draft is effectively a PSC, a sophisticated form of service contract well known to the industry, assuming a robust model is adopted.  That is a big question mark.

4. Reduced role of the National Assembly
The draft requires the EP only to notify the National Assembly of the conditions governing mixed companies, rather than seek approval. This shift concentrates additional authority in the EP and may reduce stability, as future amendments would require only an executive decree.

5. Special advantages and upfront payments
The provision on special advantages is retained, with the risk of de facto shadow taxation applied on a case-by-case basis. The draft now explicitly refers to the collection of an "economic payment" for access to reserves, akin to an upfront bonus.

6. State control and marketing rights
The requirement of majority state ownership in mixed companies remains. The draft allows private shareholders, including under PSCs, on an exceptional basis and subject to EP approval, to market crude provided prices exceed those obtained by PDVSA. At the same time, the EP must ensure "effective control of the State over the marketing strategy," a concept whose scope and implications remain undefined.

7. Integrated services agreements
The draft authorizes integrated services agreements "at reasonable prices", i.e., they ensure that production costs per barrel are lower than PDVSA’s costs, which meaning is unclear and the draft law does not distinguish among crude types, field maturity, or other technical variables.

8. Unclear provisions contemplated for the contracts
Several provisions in the contracts/PSC chapter lack clarity. The draft refers to clauses intended to restore the economic or financial equilibrium of the contract, a concept usually found in concession regimes. The mechanism applies only until payout and does not specify whether it operates exclusively in favor of the private investor.

9. Inconsistencies in fiscal terms
The royalty and extraction tax provisions use different language to suggest that the standard 30% royalty and 33.3% extraction tax may be reduced to 20% (PSCs) and 15% (mixed companies). Royalties continue to be treated as a deduction from the extraction tax. Only the royalty provision allows for restoration to higher rates if economics justify it, while the extraction tax reduction appears time-limited, creating inconsistencies between two components of the government take that are meant to work in tandem.

10. Partial abrogation of prior laws which is confusing
The draft provides only for partial repeal of the 2006 Regularization Law and the 2009 Organic Law reserving certain goods and services to the State. It remains unclear which provisions are repealed and which remain in force. Two transitory provisions introduce additional legal complexity that warrants further analysis.

About Elisabeth Eljuri

Elisabeth Eljuri is an energy executive and independent arbitrator with more than 30 years of experience in the energy and natural resources sector.
Over the past decade, Ms. Eljuri has served as an executive and co-founder of two energy portfolio companies. She was Chief Negotiator and Chief Legal Counsel at Westlawn Americas Offshore, an upstream oil and gas company focused on offshore basins in the Gulf of America and the Americas. Previously, she was an executive at Sierra Oil & Gas, a portfolio company backed by Riverstone, EnCap, and BlackRock, remaining through its successful sale to a major European energy company as one of two lead negotiators.
Earlier in her career, Ms. Eljuri spent more than 25 years in private legal practice at two of the world’s largest law firms. Until December 2015, she was Head of Latin America at Norton Rose Fulbright, where she served as a senior partner for nearly 18 years, focusing on international arbitration, energy and natural resources, and projects and infrastructure.
She also regularly sits as arbitrator in major disputes involving natural resources, energy, infrastructure, M&A, and contract law, with a particular focus on Latin America. Her arbitral work includes cases administered by ICSID, the PCA, the ICC, the LCIA, and the ICDR. She is a member of the International Court of Arbitration of the ICC in Paris and a Fellow of the Chartered Institute of Arbitrators (FCIArb)..
She has published extensively on international arbitration, investment protection, political risk management, and oil and gas, and has spoken at more than one hundred industry conferences worldwide. She has led and taught specialized workshops in oil and gas, co-chaired major training programs, and participated for two decades in the Philip C. Jessup International Law Moot Court Competition.
Ms. Eljuri is a member of the Young Presidents’ Organization (YPO) and is completing the YPO Presidents’ Gold Program at Harvard Business School. She is trained in both common law and civil law systems, graduated as valedictorian from Universidad Católica Andrés Bello, and earned her law degree from Harvard Law School. She is admitted to practice in New York and Venezuela, is based in Miami, Florida, and is fully bilingual in English and Spanish, with fluency in spoken French.