In the past, U.S. government officials have made it clear to U.S. oil companies and energy firms that any legal recourse to recover Venezuela’s seized assets will require substantial financial investments to help Venezuela rebuild its failing oil infrastructure.
The U.S. oil companies and energy firms, including the Trump Administration, have been trying to obtain payment for the lost oil fields, pipelines, and other facilities taken over by the Venezuelan government. The Trump Administration is providing U.S. companies with a way to receive payment as long as they are willing to return to Venezuela and invest billions of dollars to resume production of crude oil. U.S. government officials have made it clear to oil executives that payment for seized assets will be contingent on investing in the restoration of Venezuela’s oil infrastructure. This message comes on the heels of recent uncertainty surrounding the U.S. military operation that successfully captured Venezuelan President Nicolás Maduro.
Venezuela’s oil fields have had decades of neglect, and their future as a political state is unknown. This is why industry leaders have their doubts.
According to industry sources, as part of the ongoing talks, the government is hoping to establish the agreement as: to be able to recover and hold on to losses, you need to make the investment today. Yet, because of the state of the fields, nobody can estimate what the upkeep and repairs would require.
According to industry sources, the proposal has been around for about a week and a half.
During a televised address on Saturday, President Trump reinforced the expectations of the administration, predicting that U.S. oil companies would be investing in Venezuela very soon.
“Maduro’s capture means we will have the largest U.S. oil companies go in, spend their billions fixing the broken oil infrastructure, and produce once again. They will profit, and the country will profit,” Trump stated as he celebrated the capture of Maduro.
Venezuela’s oil sector was nationalized in the 1970’s and expanded under former President Hugo Chavez with his government takeovers nearly two decades ago. Although the country has some of the largest reserves of crude oil in the world, years of poor management and lack of investment have left the facilities in disarray.
Analysts and industry officials say the administration has yet to articulate a clear long-term strategy.
“There doesn’t appear to be a detailed plan beyond prioritizing U.S. companies in a post-Maduro scenario,” said Bob McNally, a former energy adviser to President George W. Bush. “There is still a lot left unanswered as to what the new regime looks like and how the transition unfolds.
Executive’s concerns include worker safety, payment security, oil price volatility, Venezuela’s role within OPEC, and considering the current market prices to determine if the high prices justify the intense capital investment. Recently, U.S. crude prices have been at their lowest since the pandemic, hovering near $57 per barrel.
The White House chose once again not to engage Trump on the details of his announcement. Trump did say that oil companies will be expected to front the cost of investments.
“Rebuilding will cost billions and oil companies will pay for it,” Trump said from his Mar-a-Lago estate. “They’ll be reimbursed, but we’re getting the oil flowing.”
Even with the comments, industry participants characterize the talks with the administration as inconsistent and premature.
“Engagement has existed, but it’s been uneven and hasn’t inspired confidence,” said one oil executive, who requested to remain anonymous. “It feels rushed and not fully thought through.”
Venezuela’s oil production is less than one quarter of the amount it produced back in the 1970’s, despite having over 300 billion in reserves. Mending production will still take significant amounts of investment in its aging field infrastructure, refineries, and transport.
There are still major uncertainties regarding the future of the state-owned oil company, PdVSA. Industry insiders say the administration is not intending to privatize or break up the company, but some leadership changes are anticipated.
“PdVSA won’t be broken up,” one executive said. “The thinking is that it remains the most practical vehicle for keeping production running.”
Chevron is the only major U.S. oil company operating in Venezuela under a special U.S. license. “We continue to prioritize the safety and well-being of our employees and the associated regulatory requirements,” Chevron said.
Meanwhile, something is in the works outside the administration for the potentially imminent opening of the oil sector in Venezuela. A consultant from Houston has been working on the planning and stated that the latest developments created momentum for U.S. companies to return in the near future.
That consultant is part of a large advisory group made up mostly of former Venezuelan oil officials who are trying to figure out how to restart the industry under a new government. This group is still trying to figure out whether Venezuela’s oil industry should be completely state-controlled, or whether it should fully shift to a market system.
Former U.S. officials indicate that the potential success of an oil revival is a direct function of how orderly and stable the political transition in Venezuela is.
“If the transition is chaotic, American investment will be extremely difficult,” said Carrie Filipetti. “Removing Maduro is only part of the equation. Legitimacy and stability matter just as much.”
Others argue the administration could use financial tools to attract investment, including backing projects via U.S. export and development agencies to manage political and security concerns.
Strategically, U.S. investment would also limit China’s access to Venezuelan oil and curb the flow of sanctioned crude that is sold at a discount and smuggled via tanker networks.
“Incentives exist for U.S. companies to move first,” said Richard Goldberg. “The point is to ensure that the U.S. and not competitor nations shapes the future of Venezuela.”
Yet, analysts agree that Venezuelan remains a long term bet; oil prices and the rebuilding are only part of the equation.
Once political risk is removed, “Venezuela will become incredibly valuable.,” said Landon Derentz, “Companies are watching and waiting. This isn’t an obvious opportunity.”
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