Oil was discovered in Venezuela in 1914. The Zumaque No. 1 well on eastern Lake Maracaibo was Venezuela's first commercial discovery. The beginning of the First World War, however, delayed exploration and it was not until 1922 that a well being drilled in La Rosa, in the state of Zulia, blew out of control sending oil 200 feet into the air and spreading oil all around at a rate of some 100,000 barrels daily for nine days. The world took notice of Los Barrosos No. 2, and the Bolivar Coastal Field--one of the three or four largest oil fields in the world--was discovered; the oil era had just begun for Venezula. The first law specifically concerned with hydrocarbons was introduced to Congress in 1920 by Development Minister Gumersindo Torres. It stated: "The right of exploitation does not confer any ownership on the mine. ..nor does it constitute any division of such ownership which is inalienable and imprescriptible." The second Hydrocarbons Law was enacted in 1922 and lasted for two decades. During this period, Venezuela's oil production increased rapidly. By 1928, the country was already the leading oil exporter and was producing 300,000 barrels daily. In 1943, a new Hydrocarbons Law came into being. This law unified the system of concessions that were, in many cases, overlapping and of uncertain legal status. It established reversion of concessions to the State within forty years, set royalties at a sixth (16 2/3 per cent) of the oil extracted, introduced several technical improvements and the obligation to refine, and opened the way for our Income Tax Law to be applied to the oil companies. The principle of the 50-50 profit share was established by amendments to our Income Tax Law in 1948. People in Venezuela still remember the outcry of the oil companies when this principle was adopted; they called it destructive and predicted the collapse of the industry--which twenty-five years later was still doing reasonably well.
Felix P. Rossi-Guerrero,
The Transition from Private to Public Control in the Venezuelan Petroleum Industry,
9 Vanderbilt Law Review
Available at: https://scholarship.law.vanderbilt.edu/vjtl/vol9/iss3/2