THE FUTURE of Venezuela after Nicolás Maduro remains a question mark. President Donald Trump meets tomorrow with opposition leader and Nobel Peace Prize winner María Corina Machado, who has advocated for a more prominent role for her party in the country despite Trump saying she doesn’t have the legitimacy needed to take over.
Trump has opted to work with Delcy Rodriguez, the former vice president who succeeded Maduro, while asserting the U.S. is running the country. It’s still unclear what role Machado’s party will play in a future government and how, when or if democratic elections will resume.
That political uncertainty is weighing heavily on one group in particular: Oil companies.
Trump has feted Maduro’s ouster as a golden opportunity for the oil industry. He encouraged oil companies to reinvest in the country — which has the world’s largest proven oil reserves and was once a major partner for U.S. firms before the government nationalized American assets.
But ExxonMobil CEO Darren Woods, head of the U.S.’s biggest oil empire, threw a wrench into this narrative at a White House meeting of oil executives last week.
“If we look at the legal and commercial constructs, frameworks in place today in Venezuela, today, it’s uninvestable,” Woods said.
Trump was not pleased, later telling reporters he’d be inclined to freeze Exxon out of Venezuela in response.
Numerous factors are keeping American oil companies from diving in, according to industry experts. Every phase of oil production requires years of study and tens of billions of dollars of investment before firms can see returns. Venezuela’s fragile political situation makes the investment just too risky, and American oil companies are still waiting to recover billions of dollars in assets seized under former president Hugo Chavez.
“We don’t know what the government is going to look like next week, next month or next year,” said Kevin Book, director of research at ClearView Energy Partners. “Anybody who’s going to commit billions of dollars of capital to new projects would probably want to have an understanding of the government in place and the degree to which future governments might honor deals made with the government today.”
Landon Derentz, senior director at the Atlantic Council’s Global Energy Center and former director of energy for the National Security Council, noted oil companies also have to weigh the political risks back home. If there’s a Democratic administration in 2029 or a Democratic-controlled House in 2027 it could be less receptive toward U.S. oil companies operating in Venezuela. Democrats conducted robust oversight of the oil industry in 2021 and 2022 when they controlled the House, and oil executives often said they declined to invest in new drilling because they felt antagonized by the party.
Trump has promised to get the already relatively cheap price of gas (the national average is $2.82 — down from last year’s average of $3.07 and far below the June 2022 high of $5.02) down further, as voters worry about the cost of living. But even if U.S. companies were to invest in the country, it would be years before they could produce the amounts of oil needed to impact energy prices back home.
Venezuela’s oil is considered “heavy” and “sour,” which is industry parlance for viscous oil with a high sulfur content. It’s hard to work with, and requires specialized infrastructure to transport and further refine into usable fuels. Years of punishing sanctions and neglect as well as an exodus of local industry experts over the past few decades have left the necessary infrastructure in shambles. The country’s oil output is down to just over 720,000 barrels per day. In 1997, it was producing more than 3.2 million barrels per day.
Companies would also have to invest in tangentially related infrastructure, from protecting workers to warding off mosquitos, all of which would take time to put in place. (However, the need for this infrastructure could prove to be highly lucrative: Secondary investments in roads, ports, housing and health care to support the oil industry could be the biggest investing opportunity since the collapse of the Soviet Union, Jacob Bogage, Kevin Sieff and Cat Zakrzewski reported last week.)
Smaller companies have greater tolerance for risk and appear more receptive to investing in the country. During a talk with the Economic Club of Minnesota last week, Treasury Secretary Scott Bessent said smaller private firms “want to get to Venezuela yesterday.”
Chevron, the second-largest American oil company, already has modest operations in Venezuela under special waivers, giving it a leg up. The company’s vice chairman, Mark Nelson, said last week that it could quickly expand its output in Venezuela through its joint ventures with state oil company PDVSA by 100 percent “essentially effective immediately” and increase its own output by 50 percent within the next two years.
Woods didn’t rule out longer term investments in Venezuela if the administration could ensure political stability. He said ExxonMobil, if invited by the Venezuelan government, would send teams to get a better sense of the landscape in the country that the company left 20 years ago.
If serious about ramping up production, the administration has limited choices about which companies to partner with — few firms have the ability to get oil out of the ground in hostile environments.
“The capabilities required to address the challenges that have been enumerated probably demand the best operators in the world at least optimally,” Book said. “It’s not like there’s an unlimited number of companies that are capable of doing the work that has to be done.” (The Washington Post)
