Venezuela Ends 19-Year Power Monopoly, With Oil Fields First in Line

Detailed summary

Venezuela is opening up its electricity sector to private capital for the first time since Hugo Chávez nationalized it in 2007, in a reform passed this week primarily to benefit…

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.

Venezuela is opening up its electricity sector to private capital for the first time since Hugo Chávez nationalized it in 2007, in a reform passed this week primarily to benefit oil producers and large businesses that can afford euro-pegged tariffs, while the state keeps the hydroelectric dams and main transmission lines that supply most households living with daily blackouts.

The law, which the National Assembly passed unanimously on Tuesday, lets oil producers build power plants for their own fields without state authorization, as long as those plants stay off the national grid. Other private generators need a concession from the Ministry of Electric Energy for any plant above 50 megawatts. National Assembly president Jorge Rodríguez, the interim president’s brother, said those generators will sell mainly to large consumers, at tariffs the government has yet to publish. Households that cannot pay the full price keep a subsidized rate on a state grid that experts estimate generates about 12,000 megawatts, against demand that reached 16,400 MW in September.

Aging terminals, crude-quality problems and grid failures held Venezuela’s oil exports near 1.25 million bpd through the summer, with tankers waiting as long as 30 days to load. Repsol, which holds 40% of the Petroquiriquire joint venture with PDVSA on Lake Maracaibo, had launched open requests to source its own power plants and supplies by May, Reuters reported. Power expert Miguel Lara told Reuters at the time that he did not know “which power supply will support the economic reactivation they are talking about.”

Venezuela’s US-backed oil expansion will need power that does not depend on the grid. On August 31, the White House announced that North American Blue Energy Partners, a privately held company controlled by Venezuelan businessman Alejandro Betancourt, had received 100-year concessions over 17 fields in the Lake…

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