The shock-and-awe capture of Nicolas Maduro by the United States, which was the culmination of the U.S. pressure on Venezuela in recent months, ended a tumultuous chapter in the history of the South American nation sitting on 17% of the world’s proven oil reserves.
Maduro’s arrest and the installation of a U.S.-compliant leadership in Caracas open another chapter in Venezuela’s history, which could be equally tumultuous and, in these early days, face uncertainties and operational challenges.
U.S. President Donald Trump wants the big U.S. oil firms to return to Venezuela and invest in rebuilding the oil infrastructure in the country holding the world’s biggest proven oil reserves, estimated at about 303 billion barrels.
Venezuela, a founding member of OPEC, has more oil reserves than each of its fellow OPEC members and top exporters in the Gulf, including Saudi Arabia, Iraq, the United Arab Emirates (UAE), and Iran.
With Maduro out, U.S. oil giants are set to invest billions of U.S. dollars to fix the oil infrastructure and start making money for Venezuela, according to President Trump.
“We’re going to have our very large U.S. oil companies, the biggest anywhere in the world, go in, spend billions of dollars, fix the badly broken infrastructure, oil infrastructure, and start making money for the country,” President Trump said on Saturday, shortly after the Venezuelan leader was captured and flown to the U.S. to face drug cartel-related charges in New York.
Related: The Oil Ultimatum That Led to Maduro’s Capture
The U.S. President’s vision sounds like a great opportunity for the U.S. supermajors, of which only Chevron is currently authorized to operate in Venezuela and export the crude to the United States.
In reality, the mission to fix Venezuela’s dilapidated oil infrastructure after decades of mismanagement and corruption would be a real challenge, the political and security situation on the ground permitting.
Analysts have started to quantify how much money it would take to resurrect Venezuela’s industry. It’s quite a lot, and will take at least a decade, even if U.S. oil firms were to flock to the opportunity, they say.
Returning Venezuela’s oil production to the 1970s peak of 3.5 million barrels per day (bpd), more than triple the current output of about 1 million bpd, would need $10 billion in annual investment from U.S. oil majors over the next decade, Francisco Monaldi, director of Latin American energy policy at Rice University’s Baker Institute for Public Policy, told Bloomberg.
That’s $100 billion in total over a decade.
Chevron, the other U.S. supermajor, ExxonMobil, and the largest independent, ConocoPhillips, are all being mentioned as the firms that could drive a U.S.-led recovery of Venezuela’s oil industry.
When late Venezuelan President Hugo Chavez nationalized the country’s oil production in 2007, he forced Exxon and ConocoPhillips out. Exxon was entangled in an arbitration to recover its investments, while ConocoPhillips is still owed about $10 billion, which it seeks to recoup from the assets that Chavez ordered seized.
“ConocoPhillips is monitoring developments in Venezuela and their potential implications for global energy supply and stability. It would be premature to speculate on any future business activities or investments,” a company spokesperson told Reuters.
U.S. firms are in no rush to return to Venezuela. Two days after Maduro was captured, it’s not certain whether there would be a profound change in the way Venezuela and its oil industry are being run.
“I haven’t spoken to U.S. oil companies in the last few days, but we’re pretty certain that there will be dramatic interest from Western companies,” U.S. Secretary of State Marco Rubio told ABC in an interview on Sunday.
“Non-Russian, non-Chinese companies will be very interested,” Rubio added.
“Our refineries in the Gulf Coast of the United States are the best in terms of refining this heavy crude, and there’s actually been a shortage of heavy crude around the world, so I think there would be tremendous demand and interest from private industry if given the space to do it, if given the opportunity to do it.”
By Tsvetana Paraskova for Oilprice.com
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