US says it needs to control Venezuelan oil sales indefinitely to drive change

Written by: Vallari Srivastava, Nathan Crooks and Jarrett Renshaw

Jan 7 (Reuters) – The United States must control Venezuela’s oil sales and revenue indefinitely to achieve the changes it wants to see in the country, Energy Secretary Chris Wright said on Wednesday.

The comments reflect the importance of the South American country’s crude oil reserves to President Donald Trump’s strategy since US forces toppled Venezuelan leader Nicolas Maduro in a raid on the capital Caracas on Saturday.

“We need to have that power and control over oil sales to drive the changes that need to happen in Venezuela,” Wright said at the Goldman Sachs Energy, CleanTech & Utilities Conference in Miami.

FIRST STORED OIL IS BROUGHT TO THE MARKET

He said the U.S. would first market the stored Venezuelan oil, then sell any future production to U.S. refineries specially equipped to process it, with the proceeds deposited in accounts controlled by the U.S. government.

Wright added that he was talking to U.S. oil companies to find out what conditions would allow them to enter Venezuela to help increase production there.

“The resources are huge. This should be a rich, prosperous, peaceful power plant,” he said.

“That’s the plan.”

On Tuesday, Caracas and Washington reached an agreement to export $2 billion worth of Venezuelan crude oil to the United States; This agreement will “redirect supplies from China and help Venezuela avoid deeper oil production cuts.”

The deal is a sign that Venezuelan government officials are responding to Trump’s demand that U.S. oil companies open up or risk further military intervention.

Trump said he wants interim President Delcy Rodriguez to give the United States and private companies “full access” to Venezuela’s oil industry.

Wright told the conference: “Instead of blockading the oil as it is now, we will let the oil flow.”

He said selling Venezuelan oil “will benefit the American people, the American economy and the global energy markets, but of course it will also greatly benefit the Venezuelan people.”

Shares of US refiners Marathon Petroleum, Phillips 66 and Valero Energy rose between 2.5% and 5%.

WHITE HOUSE MEETINGS

According to sources, the primary goal of Trump, who is scheduled to meet with the heads of major oil companies at the White House on Friday, is to increase crude oil production from Venezuela.

Representatives from the three largest U.S. companies, Exxon Mobil, ConocoPhillips and Chevron, all with experience in Venezuela, will be present, according to a source familiar with the planning.

The companies declined to comment.

Venezuela was producing up to 3.5 million barrels per day in the 1970s. But mismanagement and limited foreign investment have led to a huge decline in annual production, which averaged 1.1 million barrels last year.

Wright said he believes short-term production increases are possible in Venezuela, but a larger recovery to past production levels would take years.

“If conditions exist for only small capital deployments, we could achieve additional production of several hundred thousand barrels per day in the short to medium term,” Wright said. “Going back to historical production numbers, you know it takes tens of billions of dollars and a significant amount of time,” he said.

The South American country sits on the world’s largest oil reserves but accounts for only 1% of global supply.

(Reporting by Nathan Crooks and Sheila Dang in Miami and Vallari Srivastava in Bengaluru; Writing by ‌Richard Valdmanis; Editing by Saumyadeb Chakrabarty, Sriraj Kalluvila, Rod Nickel)