President Donald Trump has said that US oil companies and some European players will spend at least $100 billion in Venezuela. [its] Dilapidated Oil Industry” and create huge wealth at a January 9 meeting with top oil executives at the White House.
But the CEOs of ExxonMobil, ConocoPhillips and more soon put a damper on the message, saying it will take a long time to implement the necessary legal reforms and security measures inside the country before they can make any long-term commitments to re-enter Venezuela in the coming decades.
“Today, it’s unnecessary,” Exxon chairman and CEO Darren Woods said of Venezuela. “They have to make significant changes to the business framework, the legal system. There have to be sustainable investment protections.”
Woods said Exxon could have a technical team in Venezuela in less than two weeks to assess the situation. However, he was more unperturbed than that. He expressed confidence that the Trump administration and Venezuela’s acting leadership could make the necessary reforms.
“We have seized our assets there twice,” Wood said, adding that Exxon’s Venezuelan assets were most recently seized in 2007. “So, you can imagine that a third re-entry would require some significant changes to what we’ve seen here historically and to the current state.”
Trump has used the 2007 takeover of Conoco and Exxon in Venezuela, the January 3 shock military offensive and arrest of leader Nicolás Maduro, as well as claims of drug and human trafficking as pretexts. Trump has repeatedly called the extortion the biggest theft in American history.
“We’re going to talk about the limitations of the deal,” Trump said at the end of a public meeting before beginning a private meeting. “We have to get it [oil companies] to invest, and we have to get their money back as soon as possible, and then we can share it all between Venezuela and the United States and them. I think the formula is simple… it’s going to be a huge success.
Trump told Woods and others that he wanted “speed and quality.”
Mark Nelson, vice president of Chevron, the only U.S. producer currently operating under an exclusive license in Venezuela, said it could increase its oil flow by 50 percent in less than two years as part of the “first phase.” But that would be equivalent to raising the country’s overall output from 1 million barrels of oil a day to more than 11.1 million barrels a day — the world’s largest proven oil reserves — which peaked decades ago with production of about 4 million barrels.
Energy analysts see Chevron, which operates in partnership with Venezuela’s state oil company PDVSA, as the biggest winner because of its existing presence and infrastructure in Venezuela, while others are reluctant to invest. “We are definitely committed [Venezuela’s] present,” Nelson said, “and we look forward to helping it build a better future as a proud American company.”
Doubling Venezuela’s current oil production will take until 2030 and cost about $110 billion, according to research firm Rystad Energy, while returning to triple levels from 2000 is estimated to take more than a decade and cost $185 billion.
Like Exxon, ConocoPhillips Chairman and CEO Ryan Lance expressed interest but argued that major reforms are needed first. Conoco has been the largest lender to the exploitation of Venezuela’s natural resources for almost 20 years.
“We think big and bold, we also need to think about restructuring the entire Venezuelan energy system, including PDVSA,” Lance said. “If we can do that and think boldly, there’s an opportunity.”
Trump told Lance that the companies would start with a “clean slate” and not be reimbursed for past write-offs, which Lance said cost Conoco about $12 billion.
Trump finally acknowledged the risk oil companies take when asked about “backstops.” “They know the risks. There are risks. We’re going to help them. We’re going to make it easier, and they’re going to be there longer.”
European oil producers, Italy’s Eni and Spain’s Repsol, which has a joint venture with Venezuela, have both told Trump they want to invest more and increase production. And some private US oil producers, such as Hilcorp and Armstrong Oil and Gas, have said they are interested in producing oil from Venezuela.
Shell CEO Weil Sawan also said the oil major could invest “a few billion dollars” in Venezuela.
Top drillers and oilfield services firms Halliburton and SLB, the latter of which currently works there with Chevron, aim to do more.
However, much of what officials said was “cheerleading” for Trump, while Exxon provided a key reality check, said Dan Pickering, founder of Pickering Energy Partners, a consulting and research firm.
“The interest is high; the will is not clear,” Pickering said of companies investing billions of dollars in volatile Venezuela.
He predicted that Venezuela could increase its production by 50% in real terms within three years, but that it would still be below its historical levels. And from the outside looking in, most U.S. oil companies see new Venezuelan oil only as competition that will drive down oil prices and profits, Pickering said. “There is no good news [U.S.] Shell during the reopening of Venezuela. They will not be happy.”
For Trump, that means lower prices at the pump, which he values.
Trump reiterated that the U.S. is in the process of moving at least 30 million barrels of Venezuelan crude to the U.S. Gulf Coast over time to sell to U.S. refiners and others as part of a deal with Venezuela. Funds received in foreign bank accounts will be controlled by the White House and often returned to Venezuela where government aid is owed.
Several large Gulf Coast refineries are configured to process extra-heavy grades of crude oil produced from Venezuela. Leaders of top U.S. refiners Valero Energy and Marathon Petroleum told Trump they were able to take more Venezuelan barrels.
This story was originally featured on Fortune.com
