Venezuela's Oil Contract Conundrum: A Surge Amid Sanctions

Venezuela's oil ministry has suspended 19 production-sharing contracts and is reviewing them due to sanctions. Despite the suspension, oil output remains unaffected. The contracts involve lesser-known companies, some from tax havens. The U.S. and Venezuelan governments are closely scrutinizing these deals, aiming to potentially revoke some.

The Venezuelan oil ministry has put a temporary halt to 19 oil production-sharing contracts signed under President Nicolas Maduro's administration, according to inside sources who briefed Reuters on Thursday. Despite the freeze, national oil production and gas output remain steady, as state oil company PDVSA continues its operations by selling the crude produced from these agreements.

Both Caracas and Washington are in the process of reviewing the contracts, with a focus on their legitimacy, given they were inked during a period when Venezuela was under significant U.S. sanctions. Some contracts pertain to newly operational oil fields in challenging terrains like Lake Maracaibo and ambitious projects aiming to boost extraction in the Orinoco Belt, the country's principal oil zone.

Maduro's endeavor to attract foreign investment through this contracting model faced hurdles, largely due to previous expropriations and ongoing sanctions. Notably, some companies operating in these agreements hailed from the U.S., China, and elsewhere, while others were registered in offshore tax havens. Meanwhile, Venezuela's legislative body updated the hydrocarbon law to attract investment, offering a six-month review period for such contracts. Talks with long-time partners like Chevron are also underway to enhance collaboration.