Annotations on the discrimination of the property of the hydrocarbons according to the current Venezuelan legislation (brief analysis about who is the legal owner and administrator of oil and natural gas)

Brief analysis about who is the legal owner and administrator of oil and natural gas in Venezuela

In Venezuela, since the 19th century and until today, the conception and economic regulation of the ownership and administration of hydrocarbons has historically been materialized through an approximate number of nineteen (19) legislations. These regulations can be discriminated in three (3) large normative groups:

I) General regulations on oil activities:
Hydrocarbon laws of the years: 1920, 1921, 1922, 1925, 1928, 1935, 1938 and 1943.

II) Regulations on the regime of ownership and exploitation of hydrocarbons:
Law on Property Affected by Reversal in Hydrocarbons Concessions (1971)
Law that Reserves the State the Gas Industry (1973)
Law that reserves to the State the Exploitation of the Internal Market of Products Derived from Hydrocarbons (1973)
Organic Law that reserves to the State the Hydrocarbons Industry (1975)

III) Specific regulations on the ownership, exploitation and commercialization of hydrocarbons and derived products:
Law of Opening of the Internal Market of Gasoline (1998)
Organic Law of Gaseous Hydrocarbons and its Regulation (1999 and 2000)
Organic Hydrocarbons Law (2001 and 2006)
Law on Migration of Mixed Companies (2007)
Organic Law of Reorganization of the Internal Market of Liquid Fuels (2008)
Organic Law that reserves to the State Goods and Services Related to the Primary Activities of Hydrocarbons (2009)

The fact that in this great number of regulations and regulations, as well as in the constitutional texts of the years 1864, 1881, 1961 and 1999, has tended to use, in alternate, random or indistinct, the terms "Republic", "Nation" and "State", to define and assign the regime of ownership and administration of hydrocarbons; this, even when such terms have appreciable differences in their meaning and connotation.

In this sense, it is interesting to review the conditions or historical aspects that have originated and that gravitate in this conceptual mix or variability, since an aspect as relevant as the ownership of hydrocarbons in our country, becomes a matter of national interest; any time that any inaccuracy in it, in my opinion, could create problems for the regulator or administrator in the execution and development of public energy policies (for example: how to adequately safeguard the rights and interests of the Nation, in the granting of permits or licenses for the exploration and exploitation of oil and gaseous hydrocarbons, to private national companies or to large multinational companies in the oil and natural gas sector).

The economic and legal regulation of the ownership and administration of hydrocarbon resources (as primary energy sources) has different complexities, edges, approaches or limitations, and if such quality is indicated, referred or assigned to the State, the Nation, or the Republic; the matter can complicate the effective management of these hydrocarbon resources. While it is true that such terms (Republic, State and Nation) are intimately linked, and it is commonly accepted that such terms seem synonymous, it is also true that their connotations and administrative, economic, legal, sociological and formal derivations; are very different.

Historical and conceptual variation of the ownership and administration of hydrocarbons

In our country, the first historical act of a legal nature, to define the nomination of hydrocarbons property to the Republic, was due to the Liberator Simon Bolivar, in 1829 issuing the "Decree on Conservation and Ownership of Mines" . However, based on this fact, discrimination, ownership and administration of energy resources has had a lot of variability and inaccuracy when altering the Republic, the State, the States of the Union and the Nation.

It should be noted that the aforementioned Decree of the Liberator, defining the denomination and allocation of ownership of the mines and hydrocarbon resources for the Republic, was one of the notorious facts regarding sovereignty and defense of our natural resources, which resulted in the consecution of the war of Independence against Spain. Remember that the independence struggle, apart from the achievement of freedom and self-determination, implied the replacement of a monarchical system of government (the Spanish Crown), by a republican regime of elective, popular participation and with division of powers, as it truly constitutes the definition of Republic.

It is important to note that the Liberator Simon Bolivar, in 1828, on the occasion of the issuance of the "Organic Decree" of August 27, 1828, which he called "Fundamental Law" (a kind of first Republican Constitution), offered some notions Initial, but very important and fundamental for the country on the connotation, differentiation and social and political meaning of the terms: Nation, Republic and State.

It is worth mentioning that such legislation was promoted by for the notorious political failure generated in the so-called "Convention of Ocaña", unsuccessful attempt to try to reform the so-called "Constitution of Cucuta", to try to put order and refound the Republic (the Great Colombia). In this context, the Liberator said: "... After a detained and mature deliberation, I have resolved to take charge, as I am doing today, of the Supreme Power of the Republic, which I will exercise with the denominations of Liberator-President, who they have given the laws and public suffrages." Furthermore, in this text the definition of the Republic can be seen for the first time, as the instance that brings together and materializes the practical exercise of the supreme powers, generated, originated and granted through the popular vote.

Additionally, the aforementioned legislation also refers to the Nation, when it states: "... the national vote has been pronounced unanimously in all the Provinces, whose minutes have already reached this capital, and which they make up the great majority of the Nation". Regarding this, it is clear the distinction of the origin that identifies the nation, as the entity that is composed and represented by all citizens or inhabitants of the country.”

In addition, the same legislation of the Liberator, contains an important reference on the State, when mentioning: "... that the People in this situation, using the essential rights that are always reserved to free themselves from the ravages of anarchy and to provide possible to its conservation and future prosperity, has entrusted me with the Supreme Judiciary to consolidate the unity of the State, restore internal peace and make the reforms deemed necessary." From this, it follows that this body (State) is concerned fundamentally to the way of organizing and exercising public power, to administer and efficiently order the relations between the government, the citizens and the resources of the country; all this in order to the social, political and economic well-being of the country or nation.

Based on the foregoing, which can be inferred or considered that in our country the genesis of the concepts of Republic, Nation and State, were originated by Simón Bolívar, and making a basic revision of sociology and politics, you can appreciate the relationship and distinction between the mentioned terms. Thus, "Nation": consists of the human, historical foundation and essential subject of constituent power, representing the group of citizens who in the same territory embody sovereignty and exercise their political rights, recognizing their origin and pursuing the same destiny .

On the other hand, "State" is conceived as the technical, legal and political organization that composes and regulates the relationship between population, territory and government; for the attainment of the general welfare. And as for "Republic", its conception is identified with a form of government opposed to monarchy and autarky, fundamentally defined by the division of powers, which discriminates and / or assigns the State based on a legal framework, elective, representative and responsible; with the supreme goal of achieving the Nation's welfare.

Review briefly how the definition or allocation of ownership and administration of hydrocarbons in Venezuela has varied temporally or historically:

a) In the year 1855, the Code of Mines, stipulated that the ownership of the mines corresponded originally to the State, that is, not to the Republic, as established by Simón Bolivar in the Decree of the year 1829.

b) After the Federal War (1859 - 1863) and the issuance of the new Constitution of the year 1864, a new change was originated since ownership of natural resources (including mines) was transferred to the States of the Union , which until then belonged to the State. As a well-known fact, this regulation implied that the first oil concessions were granted by the governments of the provinces.

c) In the year 1881 another variation is generated, since the new Constitution reformed the principle of mining property by establishing a dual system, in which the ownership of the mines was recognized to the States of the Union, but assigning its fiscal administration to the Federal government; that is, the State. The latter was obliged to proportionally redistribute the income or tax benefits generated among all the States of the Union. It should be noted that this distributive system gave rise to the current constitutional system (through which the central government is obliged to distribute annual budgetary resources to the states or provinces, in proportion to the population density of each entity).

d) Many years later, another variation in the designation of ownership over such resources was generated, since the country's first hydrocarbons law (issued in 1920), separated mining and oil activities, and enshrined the power of the State to directly exploit the hydrocarbons (which could cede its exploitation to any legal and operationally relevant instance). But there is a notorious fact, since said Law did not expressly establish that ownership of the hydrocarbons corresponded to the State; that is to say, that in theory it could only develop the exploitation of the resources (process of extraction to surface of the existing oil in deposits).

e) A salient fact occurred with the regulation of the ownership of crude oil in the Hydrocarbons Law of 1943, since it clearly defined and formalized the distinction between Nation (assigning it as the owner of the hydrocarbon resource) and the Federal Executive (as administrator delegated thereof).

f) The Constitution of 1961, ratified and established in a direct and concise manner that the Nation owned the property of the mines and hydrocarbons. Additionally, he said that the State should attend to the defense and conservation of the natural resources of its territory (as administrator thereof), and the exploitation of hydrocarbon resources should at all times privilege fundamentally the collective benefit of Venezuelans (which historically it has been denominated "the sowing of petroleum").

g) The previous condition was ratified in 1971 through the issuance of the so-called Law of Affected Goods to Reversal in Hydrocarbons Concessions, which ratified the character of the Nation, as the owner of the hydrocarbons.

h) Continuing with the variation in the determination of ownership, the legislation that marked the nationalization of the hydrocarbons industry during 1975 (Organic Law that reserves to the State the Industry and Trade of Hydrocarbons), assigned the ownership of the hydrocarbon resources to the State, (not the Nation) and introduced the figure of the National Executive, as administrator of these resources, interpreting this denomination as referring to the role assigned to the Ministry of Mines and Hydrocarbons (denomination of ministry that at the time was the in charge of the tutelage of the hydrocarbon industry and now called Ministry of Petroleum).

What do the current regulations or regulations on ownership and administration of hydrocarbons establish?

i) The Constitution of the Bolivarian Republic of Venezuela establishes in its article 12 that the mineral and hydrocarbon deposits belong to the Republic, and are public property, and therefore, inalienable and imprescriptible. On the other hand, it establishes that the administration of such resources will be carried out by the State (Article 113), that is, all the processes developed or related to oil and related activities (exploration, exploitation, storage, adaptation, transportation and internal commercialization). and external hydrocarbon resources).

Notwithstanding the foregoing, the content of Article 113 of the Constitution raises a confusing fact, referring to: "... When it concerns the exploitation of natural resources owned by the Nation or the provision of public services with exclusivity or without it, the State may grant concessions for a specific period of time, always ensuring the existence of considerations or counterparts appropriate to the public interest". Here there seems to be a conceptual confusion and the union of different definitions, since it states that the resources are of the Nation (not of the Republic as indicated in article 12); that is to say that in the same legal text he uses different terms interchangeably.

ii) For its part, the current organic hydrocarbons laws ratify the Republic as the owner of the hydrocarbon deposits, and establishes that the exploitation activities of the same are exercised by the State directly (through entities owned by them) or by companies private or national, with or without the participation of the State, in the terms established in such legislation.

Based on the foregoing, we can affirm that Venezuela has an inaccuracy over the legal nomination of hydrocarbon property, since in the Constitution and the current hydrocarbons laws, the Republic and the Nation are nominated, as the owner thereof, this, even when the sociological and political definition of both terms, as we saw in previous points, are direct.

By way of conclusion, it is appropriate to affirm that such nomination should fall on the Nation instead of the Republic, so the correct thing, unless better criteria, would be to affirm: "The hydrocarbons in Venezuela with property of the Nation and are administered by the corresponding instances of the State"

What is the importance of ownership and administration of hydrocarbons?

In terms of fiscal economy, ownership over hydrocarbons by the Nation generates the right to receive the tax revenue generated by them, that is, access to economic wealth, which materializes in favor of the Nation through of the collection of royalties and taxes related to them.

On the other hand, to develop or materialize the effective management of hydrocarbons by the state, generates for the Nation, the capture of the benefits or utilities for the use and commercialization of the energy resource; it is worth mentioning the utility of the business of production and sale of hydrocarbons and derivatives (through the dividends).

The above (having the property and administering the resource), represents a great disjunctive for any country producing hydrocarbons, always holding only the property, although it guarantees the obtaining of the fiscal income (taxes and royalties), limits its domain and range of action on the scope or amplitude of public energy policies. On the contrary, by jointly exercising ownership and administration of crude oil and its derivatives, the Nation obtains maximum wealth and value for such resources, and fully dominates the design and applicability of public policies related to that sector (something like: has the resource, puts the rules of the game and effectively plays)

However, the adequate and optimal concatenation of these aspects (ownership and administration) has a high price for every Nation: the necessary possession of extensive expertise and knowledge of how to manage the hydrocarbons industry, in a market that becomes everyday more and more complex and complicated, and in addition to having the economic and financial capacity to make timely capital investments, required to give sustainability and sustainability to the said industry. These achievements, which practical experience indicates are difficult to achieve, are significantly influenced by the complex network that reflects the hydrocarbons market, its high volatility and the intense competition that develops among the players that make it up worldwide.

Guillermo Souto G.