Market sees Chevron the big Venezuela winner. But oil majors face a long road

President Donald Trump’s call for U.S. oil companies to rebuild Venezuela’s energy sector following the ouster of President Nicolás Maduro is easier said than done.

Strip It has the advantage of being the only major U.S. oil company currently operating in Venezuela, according to Wall Street analysts. ExxonMobil And ConocoPhillips He left the country after former President Hugo Chavez nationalized the industry and seized its assets in 2007.

Venezuela has the world’s largest proven crude oil reserves at 303 billion barrels, according to the U.S. Energy Information Administration. But US oil giants have a long and expensive road ahead of them to return Venezuela to the peak production of 3.5 million barrels per day it reached in the 1990s.

“This is a high-risk area for oil companies to invest,” said Arne Lohmann Rasmussen, chief analyst and head of research at Global Risk Management.

According to estimates by consulting firm Rystad Energy, investment of about $53 billion over the next 15 years will be required to maintain crude oil production levels at 1.1 million barrels per day, or bpd. According to Rystad, capital expenditures required to reach 3 million barrels per day by 2040 will more than triple to $183 billion.

Precision and stability

Bob McNally, founder of Rapidan Energy, said US oil majors will want certainty about who is in charge in Caracas and how stable the government is.

David Goldwyn, who served as the State Department’s special envoy for international energy affairs from 2009 to 2011, said that since energy investments are 30-year projects, they need to know whether the legal and financial regime will be long-term.

The situation in Caracas right now is far from clear. Trump announced on Saturday that the United States will govern Venezuela after the overthrow of Maduro. Secretary of State Marco Rubio appeared to backtrack in an interview with NBC News on Sunday, saying the United States would use its influence to pressure Caracas to meet U.S. demands.

Vice President Delcy Rodriguez came to power in Venezuela over the weekend promising that the government would protect the country’s resources, but later said Caracas was pushing to do so. cooperate with the USA

Global Risk Management’s Rasmussen said a key question is whether Venezuela can return to a regime similar to Maduro’s in the future and renationalize its oil assets.

excess reserves

McNally, a former White House energy adviser under President George W. Bush, said U.S. oil majors will wrestle with whether it makes financial sense to invest tens of billions of dollars in Venezuela when there is already so much oil in the world.

“There’s every reason to think this will be a long, winding road rather than a quick shot,” McNally said.

Chevron maintains joint ventures with state-owned Petróleos de Venezuela through a special license granted by the US government. These partnerships are responsible for about 23% of Venezuela’s production, according to JPMorgan.

“The company will be advantageously positioned to potentially scale future production as it owns significant oil resources through its joint ventures and is a major developer of the nation’s energy infrastructure,” JPMorgan analyst Arun Jayaram told clients in a note on Monday.

Chevron shares rose more than 5% on Monday.

— CNBC’s Hayley Cuccinello contributed to this report.