Trump wants Venezuela’s oil. Will his plan work?

Donald Trump has vowed to tap Venezuela’s oil reserves after taking on President Nicolás Maduro and saying the US would “manage” the country until a ‘safe’ transition.

To mobilize the largely untapped resource, the US president wants American oil companies to pour billions of dollars into the South American country, which has the largest crude oil reserves on the planet.

He said U.S. companies would repair Venezuela’s “badly broken” oil infrastructure and “start making money for the country.”

But experts have warned of major challenges to Trump’s plan, saying it would cost billions of dollars and could take up to a decade to achieve a meaningful increase in oil production.

So can the United States really take control of Venezuela’s oil reserves? So will Trump’s plan work?

It is true that Venezuela is home to the world’s largest proven oil reserves, with an estimated 303 billion barrels.

But the amount of oil the country produces today is tiny by comparison.

Production has fallen sharply since the early 2000s as former President Hugo Chavez and then the Maduro administration tightened control over state-run oil company PDVSA, prompting more experienced personnel to leave the country.

Although some Western oil firms, including US company Chevron, still operate in the country, their activities have decreased significantly as the US has expanded sanctions and targeted oil exports to deny Maduro access to a key economic lifeline.

The sanctions, which were first imposed by the USA in 2015 due to allegations of human rights violations during the administration of President Barack Obama, also caused the country to be largely deprived of investments and the parts it needed.

“The real challenge they face is their infrastructure,” says Investec head of commodities Callum Macpherson.

In November, Venezuela produced an estimated 860,000 barrels of oil per day, according to the International Energy Agency’s latest oil market report.

This is barely a third of what it was 10 years ago and accounts for less than 1% of world oil consumption.

The country’s oil reserves consist of so-called “heavy, sour” oil. It is more difficult to refine but is useful in making diesel and asphalt. The United States produces “light, sweet” oil, which is often used to make oil.

Before the attacks and Maduro’s capture, the United States seized two oil tankers off the coast of Venezuela and ordered a blockade of sanctioned tankers entering and exiting the country.

Homayoun Falakshahi, senior commodity analyst at data platform Kpler, said the main obstacles for oil companies hoping to tap Venezuela’s reserves are legal and political.

Speaking to the BBC, he said those hoping to drill in Venezuela would need to reach an agreement with the government, which would not be possible until Maduro’s successor takes office.

Mr. Falakshahi added that companies will have to gamble with billions of investments on the stability of the future Venezuelan government.

“Even if the political situation is stable, this is a process that will take months,” he said. Companies hoping to benefit from Trump’s plan will need to sign contracts with the new government once it is in place before beginning the process of increasing infrastructure investment in Venezuela.

Analysts also warned that it would take tens of billions of dollars (and possibly a decade) to restore Venezuela’s former production.

Capital Economics group chief economist Neil Shearing said Trump’s plans would have a limited impact on global oil supply and therefore its price.

He told the BBC that “there are so many hurdles to overcome and the time frame for what will happen is so long” that 2026 will likely see little change in oil prices.

Mr Shearing said companies would not invest until Venezuela had a stable government and projects would not produce results for “many years”.

“The problem has always been decades of underinvestment, mismanagement, and it’s really expensive to extract,” he said.

He added that even if the country could return to previous production levels of around 3 million barrels per day, it would still not be among the world’s top 10 producers.

And Mr Shearing noted the high production among OPEC+ countries, saying the world was currently “not short of oil”.

Chevron became the only American oil producer still operating in Venezuela after receiving a license to operate under former President Joe Biden’s administration in 2022 despite US sanctions.

The company, currently responsible for about a fifth of oil extraction in Venezuela, said it was focused on the safety of its employees and complied with “all relevant laws and regulations.”

Other major oil companies have so far remained publicly silent on the plans, with only Chevron addressing the situation.

But Mr Falakshahi said oil bosses would hold internal discussions on whether to take advantage of the opportunity.

He added: “The willingness to go somewhere depends on two main factors: the political situation and the resources on the ground.”

Despite the highly uncertain political situation, Mr Falakshahi said “the potential reward may be seen as too great to avoid”.