Series “Oil Under Control: The Nation, the State, the Industry and Oil Revenue in Venezuela”
Grupo La Petrólia
As efforts continue to institutionalize the country’s surrender of sovereignty over its main natural resource and greatest source of wealth, it is worth remembering that this crisis has deep roots. In this six-part series, we will analyze the political, economic, and institutional tensions that have accompanied Venezuela’s oil history throughout the 20th century and up to 2026. We will apply the same criteria to every stage: the concessionary regime, nationalization, internationalization, the Oil Opening, subsequent reforms, and the oil framework currently taking shape. No period will remain outside our analysis.
In this article, we begin with a central question: why did the creation of a state-owned company in 1976 fail to guarantee stable national control over oil?
People often regard 1976 as the ultimate expression of oil sovereignty. That year, the Law Reserving the Hydrocarbon Industry and Trade to the State took effect, and PDVSA began operations. But Venezuelan oil did not become national then.
Public ownership of the subsoil dates back to the Hispanic legal tradition, and the Republic reaffirmed it through Simón Bolívar’s 1829 Mining Decree, which established that “mines of every kind belong to the Republic.” National ownership of the subsoil therefore predates the modern oil industry. During the 20th century, concessionaires received rights to extract, transport, and market oil, but they never owned the resource itself.
This distinction allows us to identify three separate elements. First, ownership of the resource and its remuneration through royalties; second, the business activity of extraction and commercialization, with its costs, profits and dividends; and finally, the State’s fiscal role in taxing economic activity.
After 1976, the State itself concentrated all three dimensions. In effect, the Venezuelan State began wearing three hats simultaneously: representative of the Nation, which owned the subsoil; fiscal authority; and owner of the operating company.
The tension that, under the concessionary regime, pitted the owner and the tax authority against international companies did not disappear. It moved inside the State itself.
The national owner sought compensation for its resources; the tax authority sought revenue for society; and PDVSA needed resources to operate, invest, and expand. The question inevitably became: how much should the company retain, and how much should it transfer to the owner and the tax authority?
Although PDVSA belonged to the State, it was not equivalent to the Nation, nor could it replace the State as owner and fiscal authority. However, its growing institutional and financial autonomy eventually turned it into a kind of Trojan horse within the new oil framework. Its corporate logic prevailed over the priorities of the national owner and the revenue-collecting State.
Here we find a particularly important anomaly in Venezuela’s experience. In other oil-producing economies, a major state-owned company has not necessarily meant that the company absorbs or weakens the State’s regulatory, ownership, and fiscal functions. Norway has maintained an institutional separation between the company, state management of petroleum resources and oil policy; Alaska maintains explicit royalty mechanisms as compensation to the resource owner; and Saudi Arabia continues to collect royalties even on production by its own national oil company.
This leads to our fundamental distinction: ownership of the resource, control of the company, and appropriation of oil revenue are not the same thing.
The Nation may retain legal ownership of the subsoil and still lose the effective capacity to decide how much to produce, where to invest, how to market its oil and what proportion of the surplus should return to society.
The 1976 reorganization therefore marked an endpoint for state operation of the industry, but it also marked the beginning of a new institutional dispute. During the 1980s and 1990s, PDVSA’s corporate role gained increasing influence through internationalization, expanding investments abroad and the progressive reduction of fiscal revenue-capture mechanisms. The corporate hat thus came to dominate the owner’s hat, facilitating investments while reducing to almost zero the compensation owed to the Nation for allowing the exploitation of its resources. This occurred during the Oil Opening of the 1990s, particularly under the presidency of Luis Giusti, when this logic reached its extreme. In certain projects in the Orinoco Oil Belt, the traditional royalty rate of 16⅔% could fall to 1% for up to nine years.
But the history of this tension does not end there. The following articles will trace this dispute through 2026, examining subsequent changes in oil policy under the same criteria, regardless of the government or political orientation that promoted them.
In the next installment, we will examine how PDVSA’s corporate hat began to prevail over the other two, and how the internationalization of the 1980s and the Oil Opening of the 1990s changed the relationship among the company, oil revenue, and fiscal revenue capture, with unprecedented consequences for the Venezuelan population.
