• Foreign firms allowed greater operational control and ownership
• Transactions face reporting requirements, counterparty restrictions, U.S. oversight
• Aging infrastructure, human capital flight, power reliability threaten revival
• PDVSA’s financial and legal exposure weigh on investment outlook

Venezuela is undergoing the most consequential restructuring of its energy sector since the nationalizations of the Hugo Chávez era. Following the January 2026 US military operation that removed President Nicolás Maduro from power, Washington has shifted from a sanctions-containment strategy to a controlled restoration of Venezuelan hydrocarbon production.

As of June 2026, Venezuela’s oil exports have reportedly risen to 1.25 million barrels per day (“bpd”), their highest level since the US imposed sanctions in 2019.

Recent changes to hydrocarbons laws in Venezuela now allow foreign companies to operate oil and gas fields independently and increase their stakes in joint ventures with Venezuela’s state-owned oil and gas company Petróleos de Venezuela SA (“PDVSA”).

In April and May, the Venezuelan government signed deals with U.S. firms Hunt Overseas Oil Company and Crossover Energy involving more than USD 2bn in investments and European firms such as Eni, Repsol, and BP have reached preliminary agreements to significantly expand production in the country. In April, Repsol announced plans to triple production at a gas field it previously jointly operated with PDVSA but now operates independently thanks to changes in the law.

While foreign companies face fewer barriers to entering the country’s energy market, they must navigate regulatory uncertainty, deteriorated infrastructure, unresolved state-owned enterprise liabilities, and an evolving political transition.

Sanctions risk remains

For much of the past decade, sanctions and regulatory risks in Venezuela were relatively straightforward: most commercial activity involving the country’s energy sector was prohibited. Today, the challenge lies in determining which activities are authorized, under what licensing basis, through which financial channels, involving which counterparties, and for how long.

Although Washington has approved a broad range of energy-related transactions, restrictions on certain counterparties remain in place, extensive compliance requirements continue to apply, and proceeds from authorized transactions are supervised by US authorities.

Companies operating pursuant to U.S. sanctions authorizations in Venezuela must submit detailed reports of all transactions­­ – including counterparties, transaction values, and payments to the Venezuelan government – to the U.S. State Department and the US Energy Department ten days after initial execution and every 90 days thereafter.

Since January, the Trump administration has approved a series of general licenses issued by the Office of Foreign Assets Control (“OFAC”) for exploration, production, and transport, which function as a mechanism to allow companies seeking to operate within the U.S.-authorized framework to operate in Venezuela.

Under the general licenses, restrictions include:

• Forbidding any trading with Chinese, Russian, Iranian, Cuban, or North Korean entities in addition to any US-sanctioned companies.
• Forbidding any transactions involving debt swaps, payments in kind, gold, or digital currencies.
• Proceeds from authorized sales of Venezuelan oil and gas by sanctioned entities, such as PDVSA, must be deposited into U.S. Treasury Department-controlled escrow accounts called “Foreign Government Deposit Funds” rather than being paid directly to the Venezuelan government, its central bank, or PDVSA.

The current sanctions framework is being implemented through general license issuances pursuant to presidential executive orders rather than new legislation enacted by Congress. As a result, the executive branch retains broad discretion to modify, expand, or revoke these authorizations in response to changing political priorities.

During the Biden administration, sanctions were temporarily lifted on certain Venezuelan industries in an effort to encourage fair elections in 2024 and the release of political prisoners. But the sanctions were reimposed when the U.S. State Department determined that the Maduro regime had failed to honor its commitment to hold free and fair elections and continued to engage in human rights abuses.

While there is no indication that the Trump administration is considering a reversal of its current approach, Venezuela’s political transition remains incomplete and subject to rapid developments. As previous sanctions cycles have demonstrated, shifts in political conditions can quickly alter the regulatory environment.

Infrastructure constraints

The reopening of Venezuela’s energy sector is occurring more quickly than the rehabilitation of the country’s infrastructure can accommodate.

Venezuela holds about 17% of global reserves, more than Saudi Arabia and all other OPEC members. But practical challenges remain substantial due to the thick and tar-like nature of Venezuelan crude and the toll that years of sanctions and economic crises took on oil extraction infrastructure.

Oil spills have also been a persistent problem. PDVSA reported over 46,000 oil spills between 2010 and 2016, and the flight of skilled labor from the country during the Maduro regime has worsened deficiencies of adequate infrastructure maintenance.

Power reliability represents another concern, as energy providers and financers engaged to support US investment goals reportedly expressed skepticism about payment guarantees and the scale of repairs needed. Electrical outages and grid instability continue to affect industrial operations throughout the country, creating operational uncertainty for energy projects that depend on reliable power supplies.

To address this problem, on 2 June 2026, the Venezuelan National Assembly granted initial approval to a proposed reform to open its electricity sector to private investment. Two weeks later, on 16 June, Venezuela’s interim president Rodríguez reached an agreement with US-based General Electric to rebuild the country’s electricity grid. The deal was led by Venezuelan Energy Minister Rolando Alcalá, whose appointment by Rodríguez was seen as a welcome change after years of the energy ministry being led by senior military officers.

The devastating double earthquake that struck northern Venezuela on 24 June further complicates the investment outlook. Despite Rodríguez’s claim to a meeting of the National Economic Council that oil output has not been affected by the earthquakes, the impact on transportation networks, public utilities, and critical infrastructure will increase competition for financial resources and construction capacity.

These constraints raise concerns about the pace at which Venezuela can realistically restore production. Recent projections envision substantial output growth over the coming years, but achieving those targets will require significant and sustained infrastructure investment both within the energy industry and the country’s broader operating environment.

PDVSA and state-owned enterprise risk

State-owned PDVSA continues to represent the largest operational and financial vulnerability in the country’s energy sector. Although sanctions relief has reopened opportunities for foreign investment, most significant hydrocarbon projects will require some level of engagement with PDVSA. This exposes investors to a counterparty that remains burdened by significant financial liabilities, politicized governance, corruption exposure, and unresolved legal disputes.

As Venezuela seeks to normalize relations with global capital markets, PDVSA must simultaneously address creditor claims and debt restructuring as well as longstanding governance concerns from the Maduro era. Outstanding government and PDVSA bonds total USD 60bn, alongside USD 40bn in post-default interest growing by USD 5bn annually and making up the most significant part of Venezuela’s USD 240bn total debt pile, as reported.

In 2022, PDVSA owed its US partner Chevron over USD 3bn in unpaid invoices. However, much of this balance has been paid through in-kind oil sales since the easing of sanctions. That said, jointly owned and operated assets with PDVSA risk being subject to asset seizure or forced sale in debtors’ courts by creditors who are still awaiting repayment.

In May 2026, PDVSA engaged law firm White & Case ahead of anticipated sovereign and corporate restructuring negotiations with US and international creditors linked to roughly USD 20bn in defaulted obligations. To alleviate some of this debt, a US court approved the USD 5.9bn forced sale of PDVSA’s retail subsidiary Citgo in November 2025. Representatives from Venezuela challenged the court’s decision, and the sale has remained unexecuted pending approval from OFAC which has not provided a reason for the delay and is under no deadline to approve.

Corruption also presents a serious challenge to foreign investors dealing with PDVSA. PDVSA is subject to more than a dozen US Foreign Corrupt Practices Act (“FCPA”) enforcement actions against it involving payments to PDVSA officials. A 2024 survey of businesspeople with experience in Venezuela found that 92% of respondents considered corruption to be a “significant obstacle” to business in Venezuela.

New contractual arrangements may create further legal and financial uncertainties. Notably, in its initial proposed operating contracts circulated to US and European energy companies in May, PDVSA is seeking to route dispute and arbitration resolution first through the Hong Kong-based International Mediation Organization, a Chinese-led mediation body perceived as state-friendly.

The proposed provision would allow arbitration to avoid US courts and the International Centre for Settlement of Investment Disputes in Washington, limiting US leverage in adjudicating payment disputes.

This framework has led to concerns for US companies intending to operate under OFAC general licenses. Hong Kong is not one of the approved jurisdictions for mediation under current OFAC general licenses, potentially placing these companies in violation of their licenses. Currently, OFAC-approved venues for dispute resolution and arbitration are the US, the UK, France, and Singapore. Companies negotiating new agreements should carefully evaluate dispute-resolution provisions alongside commercial terms.

Although the Rodríguez administration has pledged governance reforms, rebuilt compliance systems, and institutional accountability, investors should not expect that decades of entrenched practices can be reversed quickly.

Political instability and potential backsliding

The reopening of Venezuela’s energy sector is ultimately contingent on the durability of the country’s political transition. While the removal of Maduro and subsequent engagement with Washington have created new opportunities, the country’s long-term political trajectory remains uncertain. Any deterioration of political conditions in the country could immediately affect the sanctions rollback, regulatory policies, and operational stability.

In a hearing before the US Senate Foreign Relations Committee in June, Secretary of State Marco Rubio said that Venezuela was “in a better place” than it was under Maduro but stressed that democratic normalization remains incomplete.

The interim administration’s ability to demonstrate effective governance will be critical to the implementation of intended reforms. Years of economic decline have left Venezuela facing extensive reconstructive needs, and the government’s response to these challenges­—including its response to the earthquakes—will likely influence the legitimization of the transition.

Though President Rodríguez’s term as acting president has expired, no plans for an election have been announced. For many investors and oil companies, the eventual organization and execution of credible elections will serve as the clearest indicator of Venezuela’s path toward political stabilization. While U.S. officials have argued that economic recovery is a prerequisite to any democratic transition, Marco Rubio announced on July 23 that a group representing the 2015 national assembly – the last recognized as democratically elected by the US – will begin negotiations with the interim government in early August in an effort to rebuild the country’s political institutions.

Cooperation with Washington has provided a potential path forward for the Venezuelan economy post-Maduro, but it may also become a source of domestic tension. Should economic improvements fail to materialize or reconstruction efforts stall, opposition to the administration could frame the government’s reform agenda as being compromised and overly influenced by US policy interests. In addition, the management of proceeds from authorized Venezuelan oil sales is emerging as a politically sensitive issue. Amid mounting reconstruction needs following the June earthquakes, uncertainty about the oversight and distribution of funds held under US supervision is becoming a point of contention in both Washington and Caracas.

But political uncertainty extends beyond questions of policy reforms. Investors must consider not only whether reforms are implemented, but whether they can survive political challenges and changes in government priorities. Historical examples have demonstrated the difficulty in creating stability in the wake of the removal of an entrenched regime. Post-conflict transitions in Iraq and Libya, as covered by Blackpeak’s Mo Abdalla, created substantial opportunities for foreign investment but were also accompanied by years of political fragmentation, security concerns, and uncertainty regarding the enforceability of commercial agreements.

Strategic Outlook

Just under seven months into the post-Maduro era, the opportunities in Venezuela’s hydrocarbon sector become clearer with every new investment announcement. But the political and regulatory framework supporting that opportunity remains in transition.

Output estimates and project timetables will be reliant on continued cooperation between the interim Rodríguez administration, or any subsequent leadership, and the US, which demonstrated its commitment to the relationship in its support for earthquake relief efforts.

Success in accessing Venezuela’s vast reserves will require recognition that Venezuela and its economy are undergoing reconstruction. For investors, the opportunity relies on pairing investment decisions with informed, on-the-ground insight into a political and regulatory environment that continues to evolve.