By Janet Ekstract, NEW YORK- After the ouster of Venezuela’s former president Nicolas Maduro, U.S. President Donald Trump told the press that U.S. oil companies were cheated and that they will take back what they’re owed. But as CNN revealed after speaking to top oil industry sources, America’s oil executives are not keen to invest in Venezuela for a plethora of reasons. A major reason is political uncertainty and a history of the Venezuelan government seizing U.S. oil assets and those sources said that with current low oil prices, oil companies can’t justify spending billions of dollars required to bring back Venezuela’s broken oil industry. CNN learned on January 5 from what it referred to as “one well-placed industry source” that what Trump wants is vastly different from what the oil industry envisions. While the White House in a statement on January 5, said: “All of our oil companies are ready and willing to make big investments in Venezuela that will rebuild their oil infrastructure, which was destroyed by the illegitimate Maduro regime.”
Meanwhile, a senior White House official told CNN that Energy Secretary Chris Wright and Secretary of State Marco Rubio will lead an effort to speak with the oil industry on behalf of Trump and that the process has already begun. Wright will be meeting oil executives this week to consider U.S. companies returning to drill for oil in Venezuela, according to a spokesperson for the U.S. Energy Department. CNN learned from two sources that energy companies told the Trump administration they are hesitant to reinvest there. While Venezuela does have the most proven oil reserves of any country including more than Iraq, Russia and the U.S. – its oil quality is considered “heavy” which makes it more expensive and difficult to refine. Couple that with Venezuela’s aging oil infrastructure and the fact that experts estimate it will cost at least $53 billion or more to revive the country’s sagging oil industry – prime reasons why oil executives don’t share Trump’s enthusiasm. Wolfe Research Managing Director of integrated oil, refiners and exploration and production Doug Leggate told CNN: “The idea that there will be an overnight restart of the Venezuelan oil industry is just unrealistic. It’s all very premature.”
Where Trump sees gold, America’s oil industry experts are more circumspect because they know the drawbacks in such a venture and that such a build-back takes decades not months. It also requires a guarantee for decades of political stability which simply cannot be predicted given the present circumstances, analysts have pointed out. According to a former Citgo chairwoman, born and raised in Venezuela Luisa Palacios: “Venezuela is broke. It doesn’t have any money. The national oil company is in disarray. It can barely feed its people.” Consulting firm Rystad Energy said to return Venezuela to producing 3 million barrels of oil per day as it did in the late 90s, total spending on oil and gas capital would have to reach $183 billion through 2040. Analysts also highlight that while cheap oil prices are great for consumers, the low-price environment makes oil CEOs and their shareholders quite hesitant to take on risky projects. Experts in the industry said that only a very few oil companies have the necessary funds and expertise to develop production in Venezuela – Chevron tops that list since it has kept a major presence in Venezuela throughout its decades of political instability. Palacios who is now interim director of research and managing director of energy transition finance at Columbia University’s Center on Global Energy Policy said: “Venezuela is the country that has seen the most expropriation cases brought against it. This means the starting risk premium is very high.” Add that to the fact that major oil companies like Exxon are now focused on developing oil in countries like Guyana which went from virtually no oil production to now producing much more than Venezuela. As Palacios concluded: “Venezuela is not the only game in town- now even in Latin America.”
