U.S. oil companies are expressing skepticism regarding President Donald Trump”s ambition to rejuvenate Venezuela”s oil industry with American assistance. Experts from Wall Street and Houston indicate that the process will neither be swift nor inexpensive.
According to reports, the reconstruction of Venezuela”s oil infrastructure could exceed $100 billion and may take over a decade to accomplish. This projection hinges on the assumption that conditions improve, a scenario that has not been the case for more than twenty years.
Francisco Monaldi, who leads Latin American energy policy at Rice University”s Baker Institute, estimates that an annual investment of $10 billion for a decade would be necessary just to restore output to levels seen in the 1970s, when Venezuela”s production peaked at nearly 4 million barrels per day. Presently, the country struggles to maintain production at around 1 million barrels daily.
The situation is exacerbated by a dilapidated oil infrastructure that has deteriorated significantly during Nicolás Maduro”s twelve-year rule. Despite Maduro”s recent capture by U.S. forces, the deep-seated issues remain unresolved. Port operations have slowed drastically, with loading a single supertanker now taking five days, a stark contrast to just one day seven years ago.
The Orinoco Basin, which holds vast reserves of crude oil, is littered with abandoned rigs, and the theft of equipment has become commonplace. Environmental oversight is virtually nonexistent, as pipeline leaks go unchecked and infrastructure crumbles.
In terms of refining, the Paraguana refinery complex, once the largest in Latin America, is barely operational, frequently shutting down and only running at minimal capacity. The refinery”s oil upgraders, essential for processing heavy crude, have been inactive.
Market analysts caution against overly optimistic projections. RBC Capital Markets, led by Helima Croft, noted that expectations for a rapid resurgence in production are unrealistic. They remarked on the potential for misinterpretation of the political climate and emphasized that a full recovery hinges on comprehensive sanctions relief and a seamless political transition.
Neil Shearing, Chief Economist at Capital Economics, highlighted the disparity between Venezuela”s claimed reserves and the practical challenges ahead, stating, “Theory and reality diverge sharply.” He also noted that even an increase to 3 million barrels a day would only marginally impact global supply.
Goldman Sachs analysts have suggested that fluctuations in Venezuela”s oil production could influence Brent crude prices by up to $2 a barrel. They predict that if production climbs significantly, it could lead to a decrease in oil prices, while a drop could have the opposite effect.
Currently, Chevron stands as the sole major U.S. oil company still active in Venezuela, responsible for about 25% of the nation”s oil output. They operate under a special license despite ongoing U.S. sanctions. Meanwhile, Exxon and ConocoPhillips have refrained from re-entering the market after withdrawing due to asset seizures in the mid-2000s.
In summary, while the potential for Venezuela”s oil industry to rebound exists, the road ahead is fraught with challenges, and the timeline for recovery remains uncertain.
