President Donald Trump has said that US oil companies, as well as some European players, will spend at least $100 billion in Venezuela to “rebuild very quickly. [its] dilapidated oil industry” and creating great wealth during a meeting with top oil executives on January 9 at the White House.
But the CEOs of ExxonMobil, ConocoPhillips and more quickly stopped the message, saying it will take a long time to implement the necessary legal reforms and security measures in the country before they can make long-term commitments to re-enter Venezuela for decades to come.
“Today, it’s uninvestable,” Exxon Chairman and CEO Darren Woods said of Venezuela. “Significant changes need to be made in those commercial frameworks, in the legal system. There need to be sustainable investment protections.”
Woods said Exxon could have a technical team on the ground in Venezuela in less than two weeks to begin assessing the situation. But there was no commitment beyond that. He expressed confidence that the Trump administration and the current leadership in Venezuela can work out the necessary reforms.
“We’ve had our assets seized there twice,” Wood said, noting that Exxon’s Venezuelan assets were most recently expropriated in 2007. “So you can imagine that re-entry a third time would require some pretty significant changes from what we’ve seen historically here and what the state is currently.”
Trump used the 2007 expropriation of Venezuela, particularly from Conoco and Exxon, as a pretext for the January 3 shock military attack and arrest of leader Nicolás Maduro, as well as allegations of drug and people-trafficking. Trump has repeatedly called expropriations the biggest theft in American history.
“We’re going to start talking about the limits of an agreement,” Trump said at the end of the public meeting before beginning a private meeting. “We have to get there [oil companies] to invest and we have to get their money back as fast as we can, and then we can split everything between Venezuela and the United States and them. I think the formula is simple… It’s going to be a huge success.”
Trump told Woods and others he wanted “speed and quality.”
Mark Nelson, the vice president of Chevron, the only US producer currently operating in Venezuela under a special license, said it could increase its oil flows by 50% in less than two years as part of a “phase 1”. But that would be equivalent to raising the country’s total volumes from nearly 1 million barrels of oil a day to more than 1.1 million barrels for a country — with the world’s largest proven oil reserves — that peaked decades ago with production of nearly 4 million barrels.
Energy analysts see Chevron, which now operates in partnership with Venezuelan state oil company PDVSA, as the biggest winner in Venezuela because of its presence and existing infrastructure, while others remain hesitant to invest. “We are certainly committed [Venezuela’s] present,” Nelson said, “and we look forward to a proud American company helping it build a better future.”
More than doubling Venezuela’s current oil production would likely take until 2030 and cost about $110 billion, according to research firm Rystad Energy, while tripling back to 2000 levels would take more than a decade and cost closer to $185 billion.
Similar to Exxon, ConocoPhillips chairman and CEO Ryan Lance has expressed interest but said major reforms are needed first. Conoco is the largest creditor since the expropriations of Venezuela’s natural resources nearly 20 years ago.
“Because we are thinking big and bold, we must also think about restructuring the entire Venezuelan energy system, including PDVSA,” Lance said. “If we can do that and think boldly, there is an opportunity.”
Trump told Lance that the companies would start with a “clean slate” and not be reimbursed for past losses, which Lance said were valued at about $12 billion for Conoco.
Finally, Trump acknowledged the risk oil companies would take when asked about the “stops.” “They know the risks. There are risks. We’re going to help them. We’re going to make it easy for them and they’re going to be there for a long time.”
The leaders of European oil producers Eni of Italy and Repsol of Spain, which together have a joint venture in Venezuela, have both informed Trump that they want to invest more and increase production. And some private U.S. oil producers, such as Hilcorp and Armstrong Oil & Gas, have said they are interested in producing oil from Venezuela.
Shell CEO Wael Sawan also said the Big Oil giant could invest “a few billion dollars” in Venezuela.
Major drilling and oilfield services firms Halliburton and SLB, the latter of which currently works with Chevron there, also said they intend to do more.
However, most of what the executives said was “cheering” for Trump, while Exxon provided the key reality check, said Dan Pickering, founder of consulting and research firm Pickering Energy Partners.
“The interest is high; the desire is unclear,” Pickering said of companies pouring billions of dollars into volatile Venezuela.
He predicts that Venezuela could realistically increase its production by 50% within three years, but that would remain well below its historical volumes. And most outside U.S. oil companies looking in only see new Venezuelan oil as competition that would drive down oil prices and profits, Pickering said. “There is no good news for [U.S.] shale in a reopening of Venezuela. They won’t be happy.”
For Trump, that means lower prices at the pump, which he values.
Trump reiterated that the US is in the process of moving at least 30 million barrels of Venezuelan crude over time to the US Gulf Coast to sell to US refiners and others as part of a deal with Venezuela. The proceeds would be controlled by the White House in foreign bank accounts and would largely be returned to Venezuela pending government cooperation.
Several of the largest refineries on the Gulf Coast are set up to process the extra-heavy crude produced in Venezuela. The leaders of top US refiners Valero Energy and Marathon Petroleum have told Trump they can take much more Venezuelan barrels.
This story was originally featured on Fortune.com
