Trump’s $100 Billion Bet on Venezuela’s Oil Comeback
Implementing President Donald Trump’s strategy for a US-led revival of Venezuela’s struggling oil industry may prove to be a lengthy and arduous endeavor, potentially requiring investments exceeding $100 billion. Years of corruption, underinvestment, fires, and thefts have resulted in the nation’s crude infrastructure being left in tatters. Restoring Venezuela’s oil production to its peak levels of the 1970s would necessitate investments of approximately $10 billion annually over the next ten years from companies such as Chevron Corp., Exxon Mobil Corp., and ConocoPhillips, according to Francisco Monaldi. “A faster recovery would require even more investment,” Monaldi stated. Venezuela holds the distinction of possessing the largest oil reserves in the world. However, output significantly declined throughout the 12-year presidency of Nicolás Maduro, who was apprehended early Saturday by US troops. The nation currently produces approximately 1 million barrels a day, in contrast to nearly 4 million barrels in 1974.
US Secretary of State Marco Rubio stated in an interview that he anticipates US oil companies will be keen to seize the opportunity to drill for Venezuela’s heavy crude, which is essential for refineries on the US Gulf Coast. “I haven’t spoken to US oil companies in the last few days, but we’re pretty certain that there will be dramatic interest,” Rubio stated. “I believe there will be significant demand and interest from private industry if provided the opportunity to pursue it.” Before entering Venezuela, companies will seek assurance of stability, as noted by Lino Carrillo. “For any oil companies to actually get serious about investing in Venezuela would require that there will be a new congress or National Assembly,” Carrillo stated in an interview. “Not what’s happening now.” Certainly not. The effort required to restore the nation’s infrastructure, on the other hand, is immense. At Venezuela’s oil ports, the equipment is in such poor condition that it requires up to five days to completely load supertankers that transport crude to China. Seven years ago, it required merely one day. In the Orinoco Basin, a vast area of Venezuela’s interior believed to contain nearly half a trillion barrels of recoverable oil, rigs have been left abandoned and spills remain unaddressed. Drilling pads have been looted in broad daylight and trafficked for parts on the black market. The nation’s extensive system of underground pipelines is widely recognized for its leaks and has, on occasion, been exploited by the state oil company, which has sold the materials as scrap metal.
Fires and explosions have devastated equipment. The extensive Paraguana oil refining complex, located on the coast northwest of Caracas, functions only sporadically and at reduced capacities as a result of ongoing breakdowns. Some of its four oil upgraders, which were once state-of-the-art facilities that pre-treat the country’s tar-like crude into feedstock suitable for refineries, have closed down. Venezuela’s remaining production is significantly dependent on Chevron, the sole major US oil company continuing its operations within the nation. The Houston-based company represents approximately 25% of the nation’s output, operating under special licenses that permit its continued presence despite US sanctions. Analysts indicated that the two other US companies most suitably positioned to assist in the reconstruction of Venezuela, considering their size and expertise, are Exxon and ConocoPhillips. Both had previously worked there but departed after their assets were nationalized by Maduro’s predecessor, the late Hugo Chavez, in the mid-2000s. Exxon and ConocoPhillips did not provide a response to requests for comment. Exxon has stated that it would consider investing in Venezuela, but only if the conditions are favorable. Chevron stated that it is committed to the safety and wellbeing of its employees, as well as the integrity of its assets in Venezuela. “We continue to operate in full compliance with all relevant laws and regulations,” the company stated. The future of Venezuela’s political transition is still highly uncertain, as is the operational landscape for oil companies.
Currently, sanctions continue to be enforced, and a US naval blockade oversees the adjacent waters. Trump has stated that Vice President Delcy Rodriguez is now in charge, despite her being a strong ally of Maduro. “I expect oil companies will start the work of updating plans and proposals for their participation — but won’t make commitments until basic political stability looks forthcoming,” said Clayton Seigle. The Trump administration’s efforts to evaluate the interest of Western oil companies are being led in part by Interior Secretary Doug Burgum and Energy Secretary Chris Wright, who serve as the chair and vice chair of Trump’s National Energy Dominance Council. Another challenge for companies looking to invest in Venezuela’s production is the reality that the world is saturated with oil, and global prices are currently near a five-year low. Numerous companies, in the meantime, continue to be owed billions of dollars in unpaid loans and compensation following the seizure of their assets under Chavez. “But oil companies may still be lured back if the price and risk premiums are right,” said Kevin Book. “You’re going to need good terms to get around heroic uncertainty,” Book stated in an interview. “The kinds of companies that are capable of profitably producing resources in Venezuela are unlikely to ignore the size of the reserve opportunity if they can see signs of relatively stability and they can secure favorable contract terms.”
