Energy Security and Arbitral Recovery: Foreign Investment Prospects in the New Venezuela  

Herbert Smith Freehills Kramer | The recent removal of President Maduro from Venezuela has triggered a flurry of political activity. However, the legal implications are also far-reaching, with important considerations for foreign investors.

In the immediate term, we can expect former Vice President and acting President Delcy Rodríguez to clarify through the National Assembly what impact there will be on the prospect of a new general election. In turn, this will impact the degree of control acting President Delcy Rodríguez has alongside the U.S. administration, and what role they will take.
Right now, it is too soon to tell - and there is much to be clarified first - but what is clear is that the focus of the U.S. administration is on the oil and gas sector.

The Venezuelan oil and gas sector is responsible for approximately 90% of the country’s revenue. Venezuela boasts the highest oil reserves of any country, over 300 billion barrels, surpassing the reserves of Saudi Arabia. The oil reserves are mainly in the Orinoco belt, which houses extra-heavy crude oil requiring specialist refineries to produce marketable volumes. Refinery infrastructure capacity to take such heavy crude oil does exist, but sanctions would have to be lifted, and logistical adjustments would have to be made. Alternative fields such as some of the other onshore fields - that produce light and medium crude – could be a focus of future development, provided the necessary technology is used. The issue much of the country faces is that PDVSA (the state-owned oil company) has shunned foreign technology to efficiently exploit its resources, and has been incapable of managing them on its own.

Notably, Delcy Rodríguez has, since August 2024, held the dual role of Vice President and Minister of Petroleum and Hydrocarbons. This ensured she oversaw the strategic direction of PDVSA and the 2025 Production Plans, including proposed reforms and an increased reliance on technology and AI. Delcy Rodríguez, as a consequence, has experience of negotiating with international oil companies that have had to co-venture with PDVSA as part of their operations.

The role of foreign investors in the oil and gas sector has been highly precarious in recent years. Apart from a few international oil and gas companies that remain in Venezuela, many were forced out under Presidents Chavez and Maduro – and their strategy of expropriation. Those that remained faced new terms of engagement and operated under significant constraints imposed by evolving sanctions regimes. A multitude of international investment arbitrations ensued, including by companies from other sectors such as mining and infrastructure. Many hundreds of millions of dollars of successful claims remain unpaid, and enforcement actions continue.

In recent years, investors holding arbitral awards against Venezuela have sought enforcement through U.S. courts among other places. In the current context, there is likely going to be an increase in the secondary market of acquiring arbitral awards, given one consequence of recent developments might be the perceived improved chances of recovery under a new Venezuelan presidency or government. Funders of potential and unmade claims might also emerge with renewed appetite.
The most immediate question for foreign investors will be to see if or when sanctions will be lifted, enabling a greater degree of freedom in production and sales to the international markets.

The U.S. has imposed extensive and escalating sanctions in recent years in response to various actions of the Venezuelan government, including sanctions designations of Venezuela’s state oil company, designations of individuals and firms "operating in" the oil sector, sanctions against the Government of Venezuela, designations of numerous Venezuelan officials (including acting President Rodriguez), and more recently, designations of "dark fleet" vessels involved in the Venezuelan oil trade. All U.S. sanctions against Venezuela remain in effect for the time being, notwithstanding the removal of President Maduro.

However, the Administration’s stated emphasis on U.S. access to Venezuelan energy and natural resources reflects an evident goal to relax sanctions as a component of a post-Maduro reset of U.S.-Venezuela relations. Subject to events and Venezuelan actions, the Administration may be prepared to grant further licenses to allow U.S. energy companies to operate in Venezuela, and may ultimately be amenable to a broader relaxation of U.S. sanctions restrictions on Venezuelan trade. In other contexts, such as Syria, the Administration has shown a willingness to rapidly relax U.S. sanctions based on changed circumstances on the ground.

It cannot be overstated how significant these developments are, not only for Venezuela, but also for the region and the global energy sector. Intense scrutiny will follow events, as the resources of Venezuela, which have long suffered from lack of investment and diminished output, are looked to be further developed. The U.S. National Security Strategy openly favours U.S. interests ahead of certain other foreign interests, and therefore, time will tell if there is a disparity of treatment in Venezuela of foreign investors looking to remain or enter the oil and gas sector. Notably, the ability of Chinese oil companies to do business in Venezuela (and recoup loans) will potentially be hotly contested.

Many who have opposed President Maduro’s tenure may cautiously welcome U.S. involvement and will be thinking in terms of reconstruction. Foreign investors would be integral to any reconstruction and redevelopment program – since the abandonment of much of Venezuela’s infrastructure (not only relating to the oil and gas sector) is severe. However, central to any such considerations by foreign investors will be the legal landscape in which such programs would be developed. This is as true under Venezuelan law as it is under international law. Long term stability, physically as well as legally, would be paramount.

A review of property rights would also likely be a part of any future investment considerations. Foreign investors considering re-investing in the country would need to be alive to competing property claims of Venezuelans and state authorities. This will take time to resolve, and there would be a need for careful coordination between national agencies and international players. Stabilization of contractual or concessionary rights would be key, as will the determination of with whom a foreign investor is contracting – a Venezuelan authority or a U.S.-based authority.

In 2012, Venezuela formally denounced the ICSID Convention, limiting investors’ ability to bring new claims under that framework. Venezuela also terminated its bilateral investment protection treaty (BIT) with The Netherlands, which had been widely used by foreign investors for treaty protection. While other BITs remain in force with many countries, the country’s commitment to international law will be tested if change results in the coming weeks and months.

HSF Kramer is closely monitoring developments, alongside experienced local counsel in Venezuela. The firm has a Venezuela Group that is able to assist our clients in navigating these developments and respond to any eventuality.

Authors: Christian Leathley, Edward Dougherty and Jonathan Cross

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