In the days following a military operation that captured Venezuelan President Nicolás Maduro the US has outlined initial elements of its Venezuela oil policy, including seizing and selling Venezuelan oil under US control and seeking to bring in billions of dollars in upstream investment. Maduro has been arraigned in New York on federal charges related to drug trafficking and conspiracy, among other criminal counts.
The White House has said it intends to supervise a transition of Venezuela’s government after Delcy Rodríguez was sworn in as the country’s interim president on 6 January. In the days leading up to and following the US military operation, US forces also seized several oil tankers linked to Venezuela, including a Russian-flagged vessel in the North Atlantic on 7 January.
On 9 January, US President Donald Trump met in Florida with more than a dozen oil and gas executives from some of the largest US producers to gauge their interest in deploying capital in Venezuela. Trump said he expects $100 billion in private investment to flow into the country to rebuild its long-struggling oil sector.
“The plan is for them to spend, meaning our giant oil companies, will be spending at least $100 billion of their money, not the government’s money. They don’t need government money. But they need government protection and need government security,” the US president said.
The largest US oil company represented at the meeting was ExxonMobil. CEO Darren Woods said the supermajor has no near-term plans to deploy capital in Venezuela. Woods noted that ExxonMobil’s history in the country stretches back to the 1940s and that its operations have been taken over by the state twice.
“And so, you can imagine to re-enter a third time would require some pretty significant changes from what we've historically seen here and what is currently the state. If we look at the legal and commercial constructs—frameworks—in place today in Venezuela, today it’s uninvestable,” said Woods.
Woods added that ExxonMobil believes Trump could work with the Venezuelan government to enact the necessary changes, while noting that the company has not held discussions with Venezuelan officials or gauged public sentiment toward a potential return.
Other oil company executives at the meeting appeared to be more optimistic about devoting resources to Venezuela but most stopped short of making a firm commitment.
Harold Hamm, CEO of the privately held independent Continental Resources, praised the removal of Maduro and said the opportunity “excites me as an explorationist.” Hamm acknowledged that the country presents “challenges,” but added, “Certainly our industry knows that this is a real jewel that can be developed for the people, for the people of Venezuela, and also benefit the world.”
Chevron is currently the only US oil company operating in Venezuela and, through joint ventures with state-owned PDVSA, has production capacity of about 240,000 B/D. Chevron CEO Mike Wirth said the company could lift output from its assets by 50% within the next 2 years and sees “a path forward” to doubling production beyond that level.
ConocoPhillips CEO Ryan Lance also praised Trump for the US operation to arrest Maduro, while noting that the company is likely Venezuela’s largest non-state creditor. ConocoPhillips has sought to recover as much as $12 billion since its assets were expropriated in 2007.
Lance said significant work is required to restructure Venezuela’s debt and financing terms, while noting that ConocoPhillips “certainly stands ready to help” restore the country’s oil production capacity.
Following the meeting, Trump told reporters that an unspecified number of oil companies have signed on to investing in Venezuela while adding that he “didn’t like Exxon’s response” and may keep the company out of his pan to boost oil supplies from the country.
US Secretary of Energy Chris Wright has reiterated in media interviews that Washington intends to control the sale of Venezuelan oil for an indefinite period and redirect the proceeds back to the country at the discretion of the US government. Wright said that control over oil sale revenues gives the US the leverage it believes is necessary to pressure Venezuelan authorities into adopting US-backed reforms.
Trump said on 6 January that Venezuela is prepared to hand over as much as 50 million bbl of crude, which analysts estimate could be worth $2.75 billion. He has also issued an executive order declaring “null and void” any attempts by courts to garnish or redirect revenue generated from US sales of Venezuelan oil to satisfy claims by private creditors.
As the Trump administration fleshes out its plans for Venezuela and US oil companies mull their options to help fund the restoration of the country’s oil sector independent analysis suggests the country needs more than $180 billion spent over the next decade and a half to return to the 3 million B/D level achieved in the mid-2000s.
Estimates of Venezuela’s current oil production range from about 800,000 B/D to 1.1 million B/D. The country reports a reserve base of roughly 300 billion bbl, the largest in the world. However, that figure has drawn scrutiny from analysts and industry specialists, who have argued that it is unaudited and has not been fully recalculated in more than a decade.
Critics also point out that the estimate does not reflect changes in economic conditions and that recovery factors for Venezuela’s heavy oil are widely believed to be below 10% of the oil in place.
