President Donald Trump appears to have significantly misjudged the situation regarding Venezuela’s oil resources. Trump has conveyed enthusiasm regarding the potential for US oil companies to access Venezuela’s extensive oil reserves. However, industry sources inform that American oil executives are not expected to engage aggressively in Venezuela for several reasons: The conditions on the ground continue to be highly unpredictable, Venezuela’s oil sector is in disarray, and Caracas has a track record of confiscating US oil properties. One of the most significant challenges is that current oil prices are insufficient to warrant the substantial financial investment – potentially amounting to tens of billions of dollars – necessary to rejuvenate Venezuela’s deteriorating oil sector. “The current enthusiasm for entering the Venezuelan market is quite limited. “We have no idea what the government there will look like,” one well-placed industry source remarked on Monday. “The president’s desire diverges from that of the industry.” The White House would have been aware of this had there been prior communication with the industry before the operation on Saturday. “All of our oil companies are ready and willing to make big investments in Venezuela that will rebuild their oil infrastructure, which was destroyed by the illegitimate Maduro regime,” Taylor Rogers stated. “American oil companies will perform exceptionally for the citizens of Venezuela and will embody the interests of the United States effectively.” A senior White House official informed that Energy Secretary Chris Wright and Secretary of State Marco Rubio will spearhead the initiative to interact with the oil industry on behalf of Trump. The official indicated that communication with oil companies has commenced and will persist moving forward. This week, Wright is scheduled to engage with oil executives regarding the potential resumption of drilling operations by US companies in Venezuela, according to a spokesperson. Sources previously informed that although Trump officials consulted with US oil companies regarding their interest in re-entering Venezuela, energy firms exhibited hesitance in making commitments to reinvest in the region. According to federal estimates, Venezuela possesses more proven oil reserves than any other nation globally, surpassing the combined reserves of Iraq, Russia, and the United States.
However, when oil companies opt to invest in remote drilling projects, they require assurance regarding the future landscape of the operating environment, potentially spanning years or even decades. Currently, it is challenging to have confidence in the stability of Venezuela’s government and institutions in the near term, much less over the long haul. “Just because there are oil reserves – even the largest in the world – doesn’t mean you’re necessarily going to produce there,” another industry source remarked. “This is not comparable to establishing a food truck operation.” This source indicated that the Trump administration prioritized “rhetoric before reality” and emphasized that political stability is “paramount” for companies considering overseas investments. Prolonged periods of insufficient investment, coupled with economic turmoil and international isolation, have resulted in a deteriorated state of Venezuela’s oil infrastructure. “Venezuela is experiencing severe economic distress. It lacks financial resources. The national oil company is experiencing significant turmoil. “It can barely feed its people,” stated Luisa Palacios.
Maintaining Venezuela’s oil production at a steady 1.1 million barrels per day, which is approximately on par with North Dakota’s output, necessitates an investment of around $53 billion over the next 15 years, as per estimates. To restore Venezuela to its peak production levels of 3 million barrels per day from the late 1990s, total capital expenditure on oil and gas would have to amount to an impressive $183 billion by 2040, as per analysis. The substantial figure underscores not only the deteriorating state of Venezuela’s infrastructure but also the nature of its oil, which is predominantly “heavy.” This type of crude presents greater challenges and costs in refining and processing compared to the lighter oil prevalent in the Permian Basin of West Texas. Crude is currently priced at a low level. Oil prices experienced a significant decline of 20% last year, marking their most substantial drop since 2020. Low oil prices benefit consumers by reducing gasoline costs to levels not seen in four years. Nevertheless, the prevailing low-price environment induces oil CEOs and their shareholders to exercise caution regarding risky projects. “The notion that a swift revival of the Venezuelan oil sector is feasible is simply not grounded in reality. “It’s all very premature,” remarked Doug Leggate. It is certainly plausible that the Trump administration may seek to address these apprehensions by implementing assurances aimed at encouraging US investment in Venezuela. It remains premature to ascertain if such incentives will be extended. Analysts and industry executives assert that only a limited number of US oil companies possess the financial resources and expertise necessary to advance production in Venezuela.
Chevron ranks highest on that list as the Houston-based firm remains the sole major Western oil entity to maintain a substantial presence in Venezuela amid decades of turmoil. “Chevron is the best positioned among US oil companies – by far,” stated Francisco Monaldi. Chevron is presently extracting approximately 150,000 barrels per day in Venezuela, as reported, while functioning under a sanctions license that was recently renewed by the Trump administration. Chevron refrained from providing responses regarding its interest in increasing production in Venezuela following the removal of President Nicolás Maduro from power. ExxonMobil and ConocoPhillips, possess the necessary expertise and robust balance sheets to facilitate the revival of Venezuela’s oil sector. However, both companies may continue to bear the marks of their previous encounters in Venezuela. In approximately 2006, the former Venezuelan leader Hugo Chavez undertook the nationalization of the oil assets belonging to Exxon and Conoco. Chevron opted to remain engaged with Caracas, whereas Exxon and Conoco exited and subsequently had their assets confiscated. Conoco continues its efforts to reclaim an estimated $12 billion following the previous nationalization of its assets in Venezuela, while ExxonMobil is pursuing nearly $2 billion, as reported. “Venezuela is the nation that has experienced the highest number of expropriation cases filed against it. “This means the starting risk premium there is very high,” stated Palacios. Exxon is concentrating on advancing significant oil discoveries in the vicinity of Guyana, which has rapidly transitioned from minimal oil production to exceeding that of Venezuela within just a few years. “Venezuela is not the only game in town – not even in Latin America,” Palacios stated.