Overview of Venezuela's Oil & Gas Sectors: Trends, Legal and Political Environment

The Venezuelan's oil and gas sectors have gone through significant legal and policy changes in the last few years under the Chavez administration. In this paper we will describe Venezuela's current legal regime applicable to investments in the oil and gas sectors and review the recent re-nationalization undertaken by the Chavez administration. This overview will provide a framework to the reader that will grant a greater understanding of the Sector's volatility and allow us to offer our thoughts on the challenges, opportunities and success factors that potential investors have to take into consideration if they seek to enter the Venezuelan oil and gas markets.

1.2. - Overview of the Oil and Gas sectors.

1.2.1. - Oil Sector:

Venezuela is one of the world's largest reserves of crude oil and oil products. It is estimated that Venezuela's reserves updated to February 2009 is approximately 122.687 Billion Barrels (Bbd).2 According to Petróleos de Venezuela, S.A. (PDVSA) (Venezuela states-owned oil company) oil production is approximately 3, 15 Thousand Barrels Per Day (Tbd); however, levels of production remain a subject of debate, with considerable difference between the levels cited by the Venezuelan government and those cited by private sector observers. Those people [16C-2] affirm that the oil output is about 2.4 (Tbd).3

Venezuela has develo