Trump Bets on U.S. Oil Majors to
Revive Venezuela’s Vast but Crippled Oil Industry
The
article explores President Trump’s claim that Venezuela’s oil industry could
once again “make a lot of money” with direct U.S. backing following the capture
of President Nicolás Maduro. Trump argues that American oil majors could pour
billions into rebuilding Venezuela’s dilapidated oil infrastructure, sharply
increasing production and revenues in a country with the world’s largest proven
oil reserves.
Despite
holding over 300 billion barrels of oil, Venezuela currently produces
only about one million barrels per day, roughly 1% of global output.
Production has collapsed from early-2010s levels due to years of
underinvestment, mismanagement at the state oil company PDVSA,
sanctions, infrastructure decay, power shortages, and theft. Much of
Venezuela’s crude is also extra heavy, making it costly and
environmentally challenging to process.
Chevron is the
only major Western oil company still operating in Venezuela, accounting for
about a quarter of national output, with roughly half of that exported
to the United States. While Chevron emphasized compliance with laws and concern
for employee safety after Maduro’s arrest, analysts see it as a likely
cornerstone of any U.S.-backed revival effort.
Experts
caution that rebuilding Venezuela’s oil sector would be expensive, slow, and
politically fraught. Estimates suggest that adding just 500,000 barrels
per day could cost around $10 billion and take two years, while a
full revival would require tens of billions of dollars over many years.
Analysts also warn that U.S. oil companies could be pushed into
quasi-governmental roles, navigating weak institutions and entrenched military
influence.
On global
markets, analysts expect limited immediate impact on oil prices, noting
Venezuela’s relatively small current output and a well-supplied global oil
market. While Trump’s plan could create long-term opportunities for U.S. firms,
the article underscores that reviving Venezuela’s oil industry would be far
more complex than presidential rhetoric suggests.
Venezuela’s
oil industry would “make a lot of money” with the United States behind it, President
Trump said Saturday in a news conference to confirm the capture of the country’s
president, Nicolás Maduro, who is facing federal drugs and weapons charges.
“We’re
going to have our very large United States oil companies, the biggest anywhere in
the world, go in, spend billions of dollars, fix the badly broken infrastructure,
the oil infrastructure, and start making money for the country,” Mr. Trump said.
He
said the Venezuelan oil industry had been “a total bust,” for a long time, adding,
“They were pumping almost nothing by comparison to what they could have been pumping.”
Mr.
Trump appears to be counting heavily on U.S. intervention in the oil industry to
help transform Venezuela, a proposition that could prove to be complicated and expensive.
How much oil does Venezuela
produce?
Venezuela
claims to have more than 300 billion barrels in the ground, the largest reserves
of oil of any country. But it struggles to produce about one million barrels a day,
or around 1 percent of global production.
In
addition, much of Venezuela’s oil is extra heavy, making it polluting and expensive
to process.
What is the state of the oil
industry in Venezuela?
The
industry has seen some recovery in recent years, but output is well below the more
than two million barrels a day that Venezuela was producing in the early 2010s.
The
national oil company, known as PDVSA, lacks the capital and expertise to increase
production. The country’s oil fields are run down and suffer from “years of insufficient
drilling, dilapidated infrastructure, frequent power cuts and equipment theft,”
according to a recent study by Energy Aspects, a research firm. The United States
has placed sanctions on Venezuelan oil, which is now exported primarily to China.
Are any Western oil companies
involved there?
Chevron
is the main Western oil company still operating in the country and produces about
a quarter of Venezuela’s oil. Early in this century, when other companies were forced
out, Chevron stayed, figuring that conditions might eventually improve.
Roughly
half of Chevron’s production is exported to the United States.
On
Saturday, Chevron said it was trying to ensure the safety of its employees and its
operations in the country after Mr. Maduro and his wife, Cilia Flores, were arrested
and removed in the U.S. military action.
The
oil giant, based in Houston, has conducted operations in Venezuela since 1923 and
has maintained five onshore and offshore production projects there.
“With
more than a century in Venezuela, we support a peaceful, lawful transition that
promotes stability and economic recovery,” said Kevin Slagle, a Chevron spokesman.
“We’re prepared to work constructively with the U.S. government during this period,
leveraging our experience and presence to strengthen U.S. energy security.”
Later
on Saturday, Chevron said it had given an incorrect statement
and issued a new one that removed mention of the U.S. government, saying: “We continue
to operate in full compliance with all relevant laws and regulations.”
What would U.S. control of
the country’s oil production mean?
In
theory, if U.S. oil companies were given greater access in Venezuela, they could
help gradually turn the industry around. “But it’s not going to be a straightforward
proposition,” said Richard Bronze, head of geopolitics at Energy Aspects.
Analysts
say increasing Venezuelan production will not be cheap. Energy Aspects estimated
that adding another half a million barrels a day of production would cost $10 billion
and take about two years.
Major
increases might require “tens of billions of dollars over multiple years,” the firm
said.
The
overthrow of the Venezuelan government may offer opportunities for American oil
companies, but they could also find themselves dragged into a messy situation, industry
analysts say.
Pressure
from Mr. Trump could “force them to play a quasi-governmental role on the capacity
building and development front,” Helima Croft, head of commodities at the investment
bank RBC Capital Markets, wrote on Saturday in an investment note.
She
added that reducing military influence over the oil industry and the broader economy
“could prove challenging.”
How will this affect oil prices?
Mr.
Trump’s intervention in Venezuela is bound to send jitters through the oil markets,
but analysts say that a major price jump is unlikely.
Venezuela
is a relatively small producer and many analysts calculate that the oil market is
currently oversupplied. Brent crude, the international benchmark, traded at $60.80
a barrel on Friday, near its lows for the year.
After
Washington conducted its operation to remove Mr. Maduro, Third Bridge, a research
firm, said in a note that it “did not see these events immediately impacting the
price of crude oil or the cost of gasoline drivers see at the pump.”