According to market analyst Wood Mackenzie, the changes to the hydrocarbons law address some long-standing concerns for international oil companies.

But it adds that the reform falls short of delivering the legal certainty and competitive fiscal terms needed to trigger large-scale, long-term capital commitments.

‘This reform is an important first step, but there is a long way to go before we will see the large-scale private company investment that is desired,’ said Graham Kellas, Senior Vice President, Global Fiscal Research for Wood Mackenzie.

The revised law, which has yet to be formally published, introduces several changes designed to improve the commercial framework for private operators, according to Wood Mackenzie.

Private operators will be allowed to operate Venezuelan projects and commercialise their share of produced hydrocarbons. However, joint ventures with state-owned Petróleos de Venezuela (PdVSA) still require a majority state-owned stake.

The reform also establishes a 30% royalty baseline rate with discretionary reductions to ensure ‘economic viability’ and introduces an integrated hydrocarbons tax (IHT) of up to 15% of gross revenue.

In addition, the law restores access to arbitration. This is a long-standing demand from foreign investors wary of Venezuela’s legal system, according to Wood Mackenzie.

It also said that a key concern for companies will be the degree of executive discretion embedded in the new framework, particularly around royalty reductions. Clarity on how and when fiscal parameters might be adjusted is essential, noted Kellas, saying that companies need predictability if they are to commit capital over decades.

Wood Mackenzie’s analysis shows that at maximum rates, the combined royalty and IHT create an effective royalty rate (ERR) of around 45% of gross revenue accruing to the state. That level of government take, the consultancy notes, remains high compared with competing upstream markets.

Even if fiscal terms are refined, Wood Mackenzie cautions that Venezuela’s recovery will depend on addressing deep-rooted structural issues. Production has fallen sharply since 2019, and rebuilding capacity will require major investment in infrastructure, supply chains and human capital.  

According to the Energy Institute’s 2025 Statistical Review of World Energy, Venezuelan oil production fell from 1,053,000 b/d in 2019 to 676,000 b/d in 2020. Production rose to 960,000 b/d in 2024, far short of the 2,692,000 b/d recorded a decade earlier in 2014.  

Latin America’s capital flows remain selective

Wood Mackenzie’s caution is reflected in another recent assessment from Rystad Energy, which argues that Venezuela’s tentative re-entry into oil markets is unlikely to materially alter the regional investment landscape over the rest of the decade.

Rystad expects Argentina, Guyana and Brazil to lead Latin American oil production growth in 2026.

Flagship projects in the three countries are expected to add more than 700,000 b/d of oil production this year, Rystad notes, estimating that these assets will continue to outcompete Venezuela through at least 2030. In the near term, it believes Venezuela could add up to 300,000 b/d to global supply. But the likelihood of investment being redirected away from established regional leaders toward Venezuela’s ageing infrastructure remains limited, it adds.

While the supermajors remain wary, Rystad sees growing interest from traders and smaller players such as Trafigura and Hillcorp.  

‘A Venezuelan oil industry makeover will be costly and lengthy,’ said Radhika Bansal, Vice President, Oil & Gas Research, Rystad Energy. ‘The Big Three in the region – Argentina, Guyana and Brazil – remain largely indifferent to the estimated, near-term return of Venezuelan crude.’ Bansal added that the real pressure point for the industry is not Venezuela alone, but oversupply more broadly.

Rystad forecasts that overall upstream investment in Latin America will increase in 2026, but the volume of conventional reserves sanctioned for development will be around 45% lower than last year. This reflects a continued consolidation around projects with near-guaranteed returns, it says.  

Regional oil production is forecast to exceed 8.8mn b/d this year, driving the bulk of non-OPEC+ supply growth.  

But Rystad argues that Latin America is no longer a single, unified oil region. ‘Multiple players are falling behind as the Big Three dictate [the region’s] future,’ it says.

Brazil is expected to remain the primary growth engine of 2026, with forecast production exceeding 4.2mn b/d, underpinned by the scale, resilience and cost competitiveness of its pre-salt developments, as well as floating production, storage and offloading (FPSO) vessel ramp-ups and new start-ups.

The true driver of accelerated investment in the region, however, is its shale sector, which Rystad expects to grow from $9.4bn in 2025 to nearly $11bn this year, all from Argentina. Additionally, the offshore deepwater sector is expected to drum up $42bn in investment in 2026, up 7.7% from the previous year.  

Looking further ahead, Rystad suggests Venezuelan barrels could become more relevant if oil demand remains resilient through the 2030s and years of underinvestment elsewhere begin to bite.

Latin American spending from 2026 to 2030, in $bn  

Note: *Trinidad and Tobago

Source: Rystad Energy