US Oil Companies Eye Investment in Venezuela Post-Trump’s Announcement

Key Points Summary:

• President Donald Trump announced plans for U.S. oil companies to invest in Venezuela following Nicolás Maduro's removal.

• Chevron is the main American company operating in Venezuela, while others like Conoco and Exxon are observing the situation closely.

• Analysts predict significant investment and infrastructure development will be necessary to revitalize Venezuela's oil sector.

In a pivotal announcement shortly after Nicolás Maduro’s removal, President Donald Trump revealed that major U.S. oil companies are poised to invest in Venezuela to revive its oil production. Trump stated, “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 oil infrastructure, and start making money for the country,” during his remarks on Saturday.

Currently, Chevron is the only significant American player actively operating within Venezuela's oil fields, which primarily produce heavy crude vital for refineries on the U.S. Gulf Coast. In contrast, Exxon Mobil and ConocoPhillips, once integral to Venezuela's oil industry, were sidelined when their operations were nationalized nearly two decades ago. The American Petroleum Institute has noted its ongoing monitoring of the evolving scenario.

Francisco Monaldi, director of the Latin America Energy Program at Rice University’s Baker Institute, asserted that Chevron stands to gain the most from a potential reopening of Venezuela’s oil market. However, he cautioned that other U.S. firms will be vigilant regarding the political landscape and the evolving legal framework governing operations in the country.

Monaldi specifically indicated that Conoco might pursue reentry due to over $10 billion in owed compensation from Venezuela, although it remains uncertain whether they will retrieve these funds without reinvesting in the country. Exxon could also consider returning, albeit its financial exposure is considerably lower. "Exxon, Conoco, and Chevron are not likely to hesitate in investing in heavy oil, particularly given U.S. demand, regardless of lesser focus on decarbonization," he explained. European companies may approach the Orinoco Belt with more caution.

Chevron previously navigated complex U.S. regulatory environments to maintain its foothold in Venezuela. Despite setbacks, including a revoked license to export Venezuelan crude under the Biden administration, Chevron secured a restricted authorization in July, allowing it to resume limited operational capacity without direct financial dealings with Maduro's government.

In December, Chevron CEO Mike Wirth highlighted the importance of sustaining an American corporate presence through political transitions. The company, which has operated in Venezuela for over a century, emphasized its commitment to employee safety and asset integrity, with a spokesperson stating, “We continue to operate in full compliance with all relevant laws and regulations.”

Key oilfield service providers, including SLB, Baker Hughes, Halliburton, and Weatherford, are critical to any potential uptick in Venezuela's heavy crude production but have not publicly commented on the situation. Eni, an Italian firm involved in natural gas production in the country, reassured that its operations remain unaffected.

However, analysts project significant challenges ahead. Peter McNally, Global Head of Sector Analysts at Third Bridge, mentioned that restoring Venezuela’s oil sector will necessitate tens of billions of dollars and could require a decade of commitment from Western oil companies.

As U.S. sanctions on Venezuelan oil remain intact, Trump reaffirmed the military presence until U.S. objectives are fully realized. “The American armada remains poised in position, and the U.S. retains all military options until United States demands have been fully met and fully satisfied,” he stated.

Despite having the world’s largest oil reserves, Venezuela’s production has plummeted to about 921,000 barrels per day as of November, a stark decline from the 3.2 million bpd recorded in 2000, according to data from the U.S. Energy Information Administration.