Donald Trump’s plan for oil windfall faces big obstacles

There are other obstacles too. Oil in Venezuela is a heavy form of crude oil that is more difficult to process and carries a heavier carbon footprint than oil pumped elsewhere. Venezuela’s power grid is on the brink, creating an uncertain outlook for oil production, which requires large amounts of energy. Additionally, after U.S. companies left the country, Russian and Chinese firms partnered with Venezuela, making it difficult for U.S. firms to re-establish.

A return to Venezuela has not been a main topic of discussion for U.S. oil companies.

With oil prices relatively low and uncertainty about how strong future demand will be amid a continuing global energy transition from fossil fuels, companies are anxious to reinvest tens of billions of dollars more in pumping in Venezuela without assurance that their investments will be safe for at least a decade, industry analysts say.

Trump’s plan to dismiss the Venezuelan leader and put the United States in charge of the country for now does not guarantee this, despite his extensive promises.

“We built Venezuela’s oil industry with the talent, effort and skill of Americans, and the socialist regime stole it from us,” Trump said. “The oil companies are going to come in. They’re going to spend money there, and frankly we’re going to get oil back that we should have gotten back a long time ago. There’s a lot of money coming out of the ground. It’s all going to be paid back to us. Everything we spent is going to be paid back to us.”

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Today, the country’s oil production is far below what it should be, and its infrastructure is badly battered by civil unrest, the departure of foreign oil companies, and related international sanctions. The country pumps only 1 million barrels of oil per day; This accounts for less than 1 percent of global production. This is less It is one-third of the peak production under Hugo Chavez’s regime and one-quarter of what experts say.

This oil has been purchased in large quantities Chinese.

The only American company operating in Venezuela is Chevron, and its production is restricted due to significant restrictions from the Venezuelan government.

“Chevron remains focused on the safety and well-being of our employees as well as the integrity of our assets,” company spokesman Bill Turenne said in a statement. “We continue to operate in full compliance with all relevant laws and regulations.”

While Rice University’s Monaldi acknowledged that companies have reason to remain reticent, he pointed to forecasts that show Venezuelan oil could be vital to meeting rising global demand over the next decade.

But none of this can happen overnight.

“Oil companies do not operate in a vacuum and significant volume growth is still years away,” said Pedro Burelli, a former board member of the Venezuelan state oil company and a critic of Venezuelan President Nicolás Maduro who now lives in the United States. “Regulation and contracts are important because U.S. oil companies are publicly traded companies with shareholders who will demand rational investment decisions.”

Oil companies have been reluctant to even increase rig numbers there, despite Trump’s repeated calls for more drilling due to demand uncertainty and falling market prices. U.S. oil production rose during the Biden administration, but the pace of growth has slowed since Trump returned to office, and some forecasts predict a decline this year.

Kevin Book, managing director of research firm ClearView Energy Partners, said oil companies will want to sign contracts that they are confident will be fulfilled in the long term, and there is currently no government in Venezuela that can fulfill such a contract.

“Before you can make all these big investments and start operating, you also need a stable country with reliable electricity, functioning ports and an existing workforce,” he said. “There are many factors to achieve this.”

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