U.S. oil companies have long wanted to reclaim assets looted from them by Venezuela’s dictatorship decades ago.
Now, the Trump administration is offering to help them achieve that goal — but with one major condition.
In recent weeks, government officials have told oil executives that if they want compensation for their rigs, pipelines and other seized property, they must be prepared to return immediately to Venezuela and invest heavily to revive its shattered oil industry, two people familiar with the government’s outreach told POLITICO on Saturday. The prospect of Venezuela’s damaged oil infrastructure is one of the main issues following the U.S. military campaign to capture leader Nicolás Maduro.
But industry insiders say the government’s messaging leaves them skeptical about the difficulty of rebuilding dilapidated oil fields in a country where it’s not even clear who will lead the country for the foreseeable future.
“They said, ‘If you want to compete and get reimbursed, you have to get in,'” said an industry official familiar with the conversations.
The offer has been under discussion for the past 10 days, the person said. “But the infrastructure there right now is so dilapidated that none of these companies can fully assess what’s needed to make it work.”
President Donald Trump said in a televised address on Saturday morning that he fully expects U.S. oil companies to pour large sums of money into Venezuela.
“We’re going to get our very large American oil companies, the largest oil companies in the world, to invest billions of dollars in repairing badly broken infrastructure, oil infrastructure, and start making money for the country,” Trump said as he celebrated Maduro’s arrest.
It’s been fifty years since the Venezuelan government first nationalized the oil industry and nearly two decades since former President Hugo Chavez expanded asset seizures. The country has the world’s largest oil reserves, but its oil infrastructure has declined due to years of mismanagement and meager investment.
In interviews with POLITICO, U.S. oil industry officials and market analysts’ initial views on a post-Maduro Venezuela focused more on questions than answers.
Bob McNally, former national security and energy adviser to President George W. Bush and now head of the energy and geopolitical consulting firm Rapidan Energy Group, said the administration so far has no long-term plan or even a long-term plan.
“It’s unclear, beyond the main decision, whether there are concrete plans to make U.S. companies — energy and otherwise — the first choice to re-enter the country in a post-Maduro, Trump-compliant regime,” McNally said. He added: “What the regime looks like and what the plan is to get there, those are not yet fully fleshed out.”
Among the top concerns among U.S. industry executives are whether the government can guarantee the safety of workers and equipment companies send to Venezuela, how companies will be paid, whether oil prices will rise enough to make Venezuelan crude profitable, and Venezuela’s place in the OPEC cartel of oil exporters. As of Friday’s close, the U.S. benchmark oil price was $57 a barrel, the lowest level since the end of the epidemic.
The White House did not immediately respond to questions about its plans for the oil industry, but Trump said during an appearance at Mar-a-Lago in Florida on Saturday that he expected oil companies to provide initial investment.
“We’re going to rebuild our oil infrastructure, and that’s going to take billions of dollars, and those costs will be paid directly by the oil companies,” Trump said. “They’re going to be compensated for what they do, but we’re going to get paid and we’re going to get the oil flowing.”
However, an industry executive familiar with the discussions said the government’s access to U.S. oil executives was still “in its infancy.” The industry executive spoke on condition of anonymity to describe conversations with the president’s team.
“In preparation for regime change, there was participation. But the participation was sporadic and the industry’s response was relatively muted,” the person said. “It felt like a shooting preparation and aim practice.”
Venezuela’s oil production has fallen to less than a third of the 3.5 million barrels a day it produced in the 1970s, and the infrastructure used to tap its 300 billion barrels of oil reserves has deteriorated over the past two decades.
“Can the United States attract U.S. oilfield services to Venezuela?” the executive asked. “Maybe. It would have to allow service companies to contract directly with the U.S. government.”
The person added that talks with government officials over the past few days also addressed the fate of the state oil company (PdVSA).
“PdVSA is not going to be denationalized and undermined in some way,” the person said. “There is no doubt that this will be a massive overhaul of PdVSA’s leadership, but at least at this point there are no plans for denationalization or auctions. It is in the best position to keep production flowing.”
Chevron, the only major oil company still operating in Venezuela under special permission from the U.S. government, said in a statement on Saturday that it “remains focused on the safety and well-being of our employees and the integrity of our assets.”
“We continue to be in full compliance with all relevant laws and regulations,” Chevron spokesman Bill Turenne said in a statement.
Evanan Romero, a Houston oil consultant involved in getting U.S. oil producers back to Venezuela, said in a text message that Saturday’s events set the stage for U.S. oil companies to return to Venezuela “soon.”
Romero is part of a committee of about 400 people, mostly former employees of Venezuela’s state-owned oil company Petroleos de Venezuela, that was formed about a year ago to develop a strategy on how to revive the country’s oil industry under a new government.
The committee, which is not directly related to opposition leader Maria Collina Machado’s camp, is discussing the role the new government should play in the oil industry. Romero said some members favor bringing the industry under government control, while others believe international oil majors will only return under a free-market system.
Carrie Filippetti, deputy assistant secretary of state for Cuba and Venezuela and deputy special representative for Venezuela in Trump’s first administration, said that ultimately, the “order” in any transition process will determine U.S. investment and return to Venezuela.
“If you see a disorderly transition, obviously I think that’s going to make it very difficult for U.S. companies to come into Venezuela,” said Filipetti, now executive director of the Vandenberg Alliance, a nonpartisan foreign policy group. “This is not just about getting rid of Maduro. It’s also about ensuring that the legitimate opposition comes to power.”
Richard Goldberg, who until August chaired the White House National Energy Stewardship Council, said the Trump administration could offer financial incentives to lure companies back to Venezuela. These could include the Export-Import Bank and the U.S. International Development Finance Corporation, whose mandate Congress expanded in December to underwrite investments against political and security risks.
Boosting U.S. investment in Venezuela would keep China, a major consumer of Venezuelan oil, away from the country and cut off the flow of discounted crude that China buys from Venezuela’s fleet of ghost tankers that evade U.S. sanctions.
“Americans have an incentive to be the first to do this and make sure that American companies, not anyone else, are in the lead,” Goldberg said.
Landon DeRentz, an energy analyst at the Atlantic Council who has worked in the Obama, Trump and Biden administrations, said it is unclear how far the Trump administration can accelerate investment in Venezuela.
Drenz said many people view Venezuela as a long-term investment given the current low oil price of $50 a barrel and the huge capital investments needed to modernize infrastructure. But he said that over time as the U.S. shale fields that made the country the world’s leading oil producer disappear, it will become increasingly economical to export Venezuela’s heavy crude to Gulf Coast refineries built specifically for processing.
“If the risks on the ground are eliminated, Venezuela will be the crown jewel. I have companies saying let’s see where it lands,” said DeRentz, who served on the National Security Council during Trump’s first term. “I didn’t see anything that made me feel like this was a ripe opportunity.”
