PDVSA Circulates Hard-Line Oil Contract That Clashes With U.S. Sanctions Rules

Overview

• Venezuela’s state oil firm sent a 90-page draft to foreign producers that sets terms to restart idle wells, drill new fields, and sell output.
• The draft routes disputes to mediation in Hong Kong through the International Organization for Mediation, then to arbitration in Paris under a tribunal administered by the Permanent Court of Arbitration’s bureau.
• Those venues conflict with U.S. Treasury licenses that require U.S. law and U.S.-based arbitration for Venezuela-related oil deals, which could block some U.S.-linked firms from signing.
• The text lets the state end a deal if people tied to an operator join “acts of political destabilization,” caps payouts in the first six years for cancellations called a public interest, and gives wide leeway on taxes and royalties.
• Lawyers reviewing the document expect longer timelines to convert preliminary accords into operating contracts, and the draft bears PDVSA President Héctor Obregón’s signature as PDVSA, Venezuela’s information ministry, and the U.S. Treasury declined to comment.