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Key Takeaways
- President Trump on Saturday said U.S. oil companies would “spend billions” to “fix” Venezuela’s oil infrastructure after years of decay under the weight of U.S. sanctions and government corruption.
- Venezuela is home to the world’s largest known oil reserves, but currently accounts for less than 1% of global production.
- Experts say oil companies will likely require amendments to Venezuelan laws, greater political and economic stability, and the repayment of Venezuelan debts to commit the capital required to achieve Trump’s goals.
President Donald Trump says the U.S. will revive Venezuela’s ailing oil industry, but experts see towering economic and legal obstacles to a quick turnaround.
President Trump, after announcing the U.S. capture of Venezuelan President Nicolás Maduro on Saturday morning, said American oil majors would “go in” and “spend billions of dollars” to “fix the badly broken infrastructure” of Venezuela’s oil industry.
The stocks of U.S. crude oil producers, refiners, and oilfield service providers were all sharply higher on Monday as investors sized up their opportunity to exploit the world’s largest known oil reserves. Chevron (CVX) shares jumped 5% to pace gainers on the Dow Jones Industrial Average, which closed at a record high.
Why This Is Important
Shares of U.S. oil companies rallied on Monday as investors bet the ousting of Venezuelan President Nicolás Maduro would open up the country’s vast oil reserves to U.S. producers and refiners. Experts say it will cost tens of billions of dollars to repair Venezuela’s tattered infrastructure.
A Decimated Oil Industry
Venezuela sits on an estimated 300 billion barrels of oil, or nearly 20% of global supply. But years of economic turmoil, corruption and U.S. sanctions have decimated Venezuela’s oil industry. In 2024, the country produced about 900,000 barrels per day, down from nearly 3.5 million in 1997.
Experts say boosting Venezuela’s oil production to levels not seen in decades will be neither easy nor cheap. Energy industry consultancy Wood Mackenzie recently estimated that the country could pump about 2 million barrels a day—a return to mid-2010s levels—within one to two years with “operational improvements and some modest investment.” To increase production to 2.5 million barrels, however, would require investment of $15 billion to $20 billion over the next decade.
The economics of extracting and using Venezuela’s heavy oil will also be an obstacle to investment, according to Jesus Davis, Senior Vice President of Energy Services at Industrial Info Resources. Most Venezuelan crude trades at a discount to U.S. oil because it is more expensive to process. With West Texas Intermediate, the U.S. benchmark, trading at about $58 a barrel on Monday, “the discounted Venezuelan barrels do make the math a bit more complex when looking at tens of billions of dollars in investment,” said Davis.
Obstacles to Attracting Foreign Capital
Chevron is the only U.S. producer currently operating in Venezuela, which every other firm abandoned as the country nationalized the oil industry. Repairing the country’s oil infrastructure will likely require the participation of U.S. giants such as ExxonMobil (XOM) and ConocoPhillips (COP). Both firms are owed billions for assets seized during nationalization, and experts say the companies will likely require guarantees of restitution before returning to the country.
“Venezuela could pay off these claims by inviting investors back to the country,” said Luisa Palacios, Interim Director of Research at Columbia University’s Center on Global Energy Policy. But attracting foreign capital will likely require changes to the laws governing the industry and a restructuring of the country’s $200 billion in debt, according to Palacios.
“Greenfield investment to raise Venezuelan production is a long and tough slog,” said Daniel Sternoff, a senior fellow at Columbia’s Center on Global Energy Policy. He estimated a return to 2.5 million barrels a day would cost between $80 billion and $90 billion.
Political instability remains an obstacle to reviving Venezuela’s oil industry. President Trump on Saturday said the U.S. would “run the country until such time as we can do a safe, proper and judicious transition.” Vice President and Maduro ally Delcy Rodriguez was sworn in as acting president over the weekend, but opposition leaders, including Nobel Peace Prize winner María Corina Machado, contend the government remains illegitimate. U.S. officials have indicated they intend to maintain a military presence as potential leverage over the new government.
Potential Investors Eye Opportunities
Some U.S. investors were looking past these challenges on Monday to focus on the opportunities at hand. Charles Myers, founder of Signum Global Advisors, told CNBC on Monday that his firm is planning a trip to Venezuela in March to explore investment opportunities with clients including asset managers and hedge funds.
“This is a major infrastructure play,” said Myers. “I think it could be as big as $500 billion over the next 10 years.”
Myers expressed confidence the U.S. government and military would support his and other investors’ efforts. “There will be security guarantees. We already have a pretty important, or meaningful, one already, which is the scale of the United States military presence offshore of Venezuela,” Myers said. He added he “wouldn’t rule out some kind of U.S. government backstop” for American capital being deployed in Venezuela.
