In recent weeks, the White House and the State Department have informed US oil executives that to receive compensation for assets seized by Venezuela two decades ago, they would need to return quickly and invest substantial capital to help revive the country’s struggling oil industry.
During the 2000s, Venezuela expropriated the assets of several international oil companies that refused to grant greater operational control to the state-owned oil company PDVSA, as then-President Hugo Chávez had demanded. Chevron negotiated to remain in the country through joint ventures with PDVSA, while competitors such as ExxonMobil and ConocoPhillips exited and pursued arbitration.
This follows President Donald Trump’s comments on Saturday that the removal of Venezuelan President Nicolás Maduro will unlock the country’s $17.3 trillion oil reserve. Currently, Venezuela holds the largest oil reserves in the world.
US investors to lead efforts to revive Venezuela’s oil industry
President Donald Trump said on Saturday that American firms were ready to return to Venezuela and spend to revive the struggling oil sector, just hours after President Nicolás Maduro had been captured and ousted by US forces.
In recent talks with oil executives from the United States administration, officials have stated that if Maduro were replaced, American oil companies would have to fund the investment themselves to reconstruct Venezuela’s oil industry. That was one of the conditions that would have to be met for them to settle debts from the expropriations in the end.
The move would heavily penalize companies such as ConocoPhillips, according to the sources. In recent years, following the nationalization of its assets in Venezuela under the Chávez administration, ConocoPhillips has spent nearly $12 billion. ExxonMobil has also pursued arbitration abroad, seeking to recover approximately $1.65 billion for lost income. Last month, when US President Donald Trump ordered an oil tanker blockade to shut out Venezuelan vessels, the revival of attention to these expropriations brought public knowledge back anew.
Oil companies weigh risks before returning
Any return, the sources said, would depend on how executives, boards, and shareholders assess the risks of re-investing in Venezuela. The company is tracking developments in Venezuela and their potential impact on global energy supply and stability, said a ConocoPhillips spokesperson.
It’s also too early to talk about any future business plans or investments, the spokesperson said. The company repeated the same message on Sunday when asked about possible talks with government officials.
Exxon did not respond right away to questions from reporters on Sunday. Analysts said that even if oil companies decide to return to Venezuela, it could take several years for oil production to rise significantly. Venezuela has some of the largest oil reserves in the world, but its output has fallen sharply over the years due to poor management, a lack of investment, and US sanctions.
Experts said that companies would face many challenges. These include unclear contract rules, security risks, weak infrastructure, questions about the legality of US actions against President Nicolás Maduro, and the risk of long-term political instability.
As one of the earliest members of the Organisation of the Petroleum Exporting Countries (OPEC), Venezuela was once a major global oil producer. By the 2010s, however, production had fallen to below 2 million barrels per day for a combination of reasons.
The country suffered under years of mismanagement and underinvestment, rebuked by sanctions during a time when domestic political dissatisfaction with socialism was also growing. Last year, Venezuela was producing an average of 1.1 million barrels a day. This represents only a fraction of the global output, in sharp contrast to its former role as one of the leading suppliers of crude oil worldwide.
While President Donald Trump suggested that US firms could invest billions to rebuild Venezuela’s energy infrastructure, analysts remain skeptical that this will be the case in the long term. There are significant doubts about whether the oil majors will want to invest in a highly uncertain environment.
“There will undoubtedly be a segment of the market that will embrace a ‘Mission Accomplished’ narrative and will pencil-in an easy glide path back to 3 million barrels a day of production,” analysts including Helima Croft said in a note, adding that full sanctions relief could unlock several hundred thousand barrels a day in the next 12 months assuming an orderly transition of power.
Still, “the situation at the time of writing remains very fluid, but we continue to caution market observers that it will be a long road back for the country,” they said.
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