The Energy Regulation and Markets Review - Stikeman Elliott

Venezuela
reserve any product at any time causes clear uncertainty with respect to any planned or
proposed investment by private parties to market by-products.
The supply, storage, transport, distribution and sale of hydrocarbons by-products
require a permit issued by the MEP.
On 4 September 2008 the Organic Law to Reorganise the Internal Market of
Liquid Fuels was passed, which sets out that only to the state may act as intermediary for
the supply of liquid fuels between PDVSA and the entities selling the fuel. The transport
of liquid fuels is also reserved to the state.
Gas activities
The Gas Law governs all exploration activities for non-associated gas and exploitation of
such reservoirs; collection, storage and use of non associated gas, as well as associated gas
(with oil and other fossils); and the processing, industrialisation, transport, distribution,
internal and external commerce of such gases. Also, the Law regulates all matters
related to liquid hydrocarbons and non-hydrocarbon components contained in gaseous
hydrocarbon production, as well as the gas derived from the process of oil refining. In
view of the broad scope of the Gas Law, it could be concluded that only associated gas at
the wellhead falls within the scope of the Hydrocarbons Law.
Gas-related activities can be performed directly by the state; state-owned
companies or private entities, with no need for state participation. Therefore, the gas
sector is totally open to private participation.
Exploration and exploitation of non-associated gas require a licence; any other
gas-related activities by private parties (such as processing, industrialisation, storage,
transportation, distribution or commercialisation of gas) require a permit. The MEP is
in charge of granting the licences or permits to entities carrying out gas-related activities.
Such licence is subject to inclusion of the following:
a the description of the project indicating the destiny of the hydrocarbons;
b a maximum term of 35 years, subject to extension by the parties for not more
than 30 years;
c a term of five years to comply with exploration and compliance with programmes;
d description of the area;
e
f
g
special contributions to the state;
land and equipment to be kept in good condition and working order to be
delivered to the state free of liens, in case of termination of the rights for any
reason; and
any dispute arising from the performance of the activities will be decided by the
courts under Venezuelan law.
The MEP (through a resolution) will determine the areas where the exploration and
exploitation of non-associated gas may be carried out.
The permits are similar to the licences (except for those not applicable to them
such as compliance with exploratory programmes or the description of an area). The
permits for entities involved in the industrialisation of gas or commercialisation of
liquefied petroleum gas are not subject to the 35-year limitation or to returning the
assets at the end of the term.
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