President Donald Trump’s policy misfires in the Middle East are having one unexpected beneficiary — his policy goals in Venezuela.
Oil companies large and small are showing new interest in committing to drill in Venezuela, after months of reluctance following the Trump administration’s call for them to do so in the wake of the U.S. removing its former president, industry lawyers and consultants familiar with the issue said. One of the largest deciding factors, they said, is the newly exposed fragility of the Middle East as an energy supplier that the fighting between the U.S., Israel and Iran have put on full display.
“You see this view industry-wide, right or wrong, that there’s a long-term disruption going on all over the market,” said Jason Bennett, global projects director at law firm Baker Botts. Venezuela is “looking pretty good right now, despite their historical problems.”
While the White House has in the past several months highlighted nonbinding agreements that some smaller companies have signed to develop Venezuelan oil fields, industry officials are saying they expect big contracts to land soon. Formal, binding deals would be a big win for the White House, which has tried with little luck so far to cajole the industry to get into Venezuela even before it captured the country’s former president, Nicolás Maduro, in January.
Larger international companies are now giving Venezuela — and its South American neighbor Argentina — a closer look as oil supply out the Strait of Hormuz remains all but shuttered, Bennett said. Trump announced a peace deal between the U.S. and Iran on Sunday that he said would “fully authorize the toll-free opening” of Hormuz.
The Venezuelan government’s reforms to its laws regulating the industry are still not perfect but are going enough in the right direction to assuage the worst fears of U.S. industry executives, Bennett added.
Companies are in discussions with White House officials about committing to develop specific oil fields in a country with the world’s largest crude reserves. The mood is becoming more serious as companies are overcoming their earlier worries about working with Venezuela’s government and oil prices remain higher than the $67 a barrel they were before the fighting with Iran started, the industry officials said.
The Venezuelan government has started to hold aside fields for companies that sign non-binding memorandums of understanding, essentially allowing those companies to informally claim areas as long as their deal-making continues, people familiar with the talks said.
“I’ve signed up probably as many new clients over the last few weeks than I did when things first ‘opened up,’” said an industry lawyer whose clients have talked to the White House about the possibility of drilling in Venezuela and who was granted anonymity because he wasn’t authorized to speak to the press.
“Fields and opportunities are essentially getting ‘allocated’ in the engagement with the White House and with PDVSA,” this person said, referring to Venezuela’s state-run oil company.“Certainly the diversity [of operations] outside of the Middle East is a factor, especially as the industry is realizing that the uncertainty in the Persian Gulf may linger much longer than originally expected.”
Venezuelan government officials did not respond to requests for comment on whether they are holding aside oil fields for companies still in negotiations.
White House spokesperson Taylor Rogers said in a statement that Trump was “right” that oil companies would flock back to Venezuela.
“The Trump administration is successfully fostering productive relationships with the Venezuelan authorities while facilitating much-needed changes to the country’s laws and contracts,” Rogers said. “Now, thanks to the President, companies are rushing back to invest billions, Venezuela’s oil exports have jumped to the highest levels since 2018, and oil is flowing into the United States.”
Jarrod Agen, executive director of the White House’s National Energy Dominance Council, said at POLITICO’s Energy Summit last week that Venezuela is moving from the MOU phase to binding contract phase.
“It’s progressed significantly over the last couple weeks,” Agen said. “It’s going to send a big signal to the world if we can get these binding contracts done.”
Small independent firms like Hunt Oil, HKN Energy and Crossover Energy have signed MOUs, essentially pledging to keep discussing the possibility of more permanent deals to drill in a country with the world’s largest oil reserves but also a history of appropriating industry assets. Companies are also growing fearful of missing out on prime Venezuelan real estate as the Trump administration and Caracas are promising fields to companies who sign memorandums of understanding, the industry lawyer said.
Elias Ferrer, director of the Caracas-based advisory firm Orinoco Research, said interim President Delcy Rodríguez has allowed companies to essentially “call dibs” on oil fields without a binding contract, setting off a rush to secure acreage in the country.
“There’s a bit of, like, FOMO,” he said. “It’s first-come, first-serve, so that’s why everyone wants to come in and ask for a field before someone else is going to get it.”
Ferrer said “most” of Venezuela’s oil fields are now under an MOU or initial agreement with an oil company, many of them U.S. firms that have come down on trips with high-level Trump administration officials. Those companies are now working on crafting binding production contracts with state-run Petróleos de Venezuela.
In addition to the U.S., the war in Iran has also sparked renewed interest in Venezuela from countries in Asia and Europe that are struggling to find alternative sources of oil, Ferrer said. India became the second-largest buyer of importer of Venezuelan oil in May, and Rodríguez visited the country earlier this month.
The Trump administration has long hoped that larger companies would join the cavalcade to Caracas. Chevron, which remained in the country even after others left following Venezuela nationalizing their assets decades ago, is looking to expand its production, according to Bloomberg. Exxon, whose CEO, Darren Woods, not long ago called the country “uninvestable,” has sent a technical team there, Exxon’s head of upstream Dan Ammann said in Houston in March.
There were also indications of progress last week on one of the major sticking points holding companies back from signing binding contracts: dispute resolution. Venezuela has insisted that contract disputes be handled in the country, but proposed last month that arbitration take place in Hong Kong, or Paris if those talks fail.
Under the General Licenses the Treasury Department offered earlier this year to authorize work in Venezuela without fear of sanctions, the Trump administration had required that dispute resolution take place in the U.S. But the Treasury Department amended those licenses on June 10 to allow proceedings to take place in the U.S., U.K., France or Singapore.
The venue for dispute resolution was the subject of discussion during a Trump administration visit to Caracas last week, according to an industry official familiar with the trip. Rogers, the White House spokesperson, didn’t respond to a request for comment on the trip.
José Ignacio Hernandez, a senior specialist at advisory firm Aurora Macro Strategies, wrote in a blog post that the updates to the General Licenses “may facilitate harmonization” with Caracas’ position, but Venezuela will still need to make changes to its laws to give companies certainty.
“Many potential contradictions remain to be resolved under Venezuelan law,” he wrote.
