Leaders around the world questioned the geopolitics and legality of Saturday’s U.S. raid in Venezuela, but President Donald Trump presented it as a business transaction.
The United States plans to get its money back.
The South American petrostate has the world’s largest oil reserves. So, Trump said, there should be plenty of money to revive oil production, pay back oil companies who say they were wronged years ago by nationalization and lift the fortunes of the beleaguered population of Venezuela.
“We’re going to get reimbursed for all of that. We’re going to get reimbursed for everything that we spend,” Trump said during a Saturday news conference. The “money coming out of the ground is very substantial, so it’s not going to cost us anything.”
But reimbursement is not as simple as it might seem in the wake of the dramatic U.S. capture of President Nicolás Maduro on Saturday morning and drug trafficking charges. Analysts say restoring the Venezuelan oil industry won’t happen fast and won’t be easy — and there are some early warning signs.
For one thing, oil companies are not rushing in to set up shop. POLITICO reported over the weekend that some industry officials are waiting whether the conflict-ridden country will hospitable to oil development. Some observers say the Trump administration hasn’t done much to show it will be.
Part of the reluctance is tied to the current glut of oil, which has driven prices so low that U.S. oil companies are starting to back off some of their production plans in the United States. The International Energy Agency has said there are nearly 2 million extra barrels per day of oil in the global market, or about twice what Venezuela has been supplying. U.S. benchmark crude traded last week below $60 a barrel, a level considered at or below the breakeven point for many oil projects.
And there are other big international plays, including some in more stable areas of South America such as off the coast of Guyana, that promise years of supply.
While Trump says the previous Venezuelan administrations “stole” American oil, the reserves never belonged to the United States or companies based in the United States. The Venezuelan government nationalized and took control of wells, pipelines and other infrastructure.
Beyond all of that, it’s not clear what Trump and his top leaders mean when they talk about “reimbursement” and funding Venezuela operations with the country’s oil money. The White House didn’t immediately respond to a request for comment Sunday, though Trump told reporters that the U.S. action in Venezuela is about “peace on earth.”
“The phrase ‘take the oil’ has been used a lot in articles and punditry, but just like energy dominance, there’s a lot of room to define it within the broader context of how things really work,” Kevin Book, a managing director at research firm ClearView Energy Partners, said in an interview. “It’s just not that simple.”
The stunning capture of Maduro followed a long buildup of lethal attacks on alleged drug boats and seizure of oil tankers.
The sudden escalation was among the most forceful U.S. foreign operations since the invasion of Iraq in 2003.
Maduro and his wife, Cilia Flores, were transported to New York and will face U.S. charges of drug trafficking and participating in a narco-terrorism conspiracy.
Trump said Saturday that a previously announced blockade of sanctioned oil tankers is still in effect off the coast of Venezuela. And he said the United States will run Venezuela until there’s a “proper and judicious transition.”
Venezuela, which is about 1,300 miles from Florida, has the world’s largest proved oil reserves with nearly 304 billion barrels. By contrast, U.S. reserves are pegged at 69 billion barrels. Production in Venezuela, however, has plummeted amid economic collapse while U.S. crude production has surged in record levels in recent years.
Texas-based Chevron is the one U.S. oil producer still operating in Venezuela under a license the Trump administration renewed earlier this year.
“Chevron remains focused on the safety and wellbeing of our employees, as well as the integrity of our assets,” Chevron spokesperson Bill Turenne said in a statement Sunday. “We continue to operate in full compliance with all relevant laws and regulations.”
Kenneth Medlock, an energy economist at Rice University’s Baker Institute for Public Policy, said companies such as Exxon and ConocoPhillips — which were active before the Venezuelan government started nationalizing its oil industry — “will likely be the first to emerge” as other possible operators in the country. Both companies are based in Texas.
ConocoPhillips left Venezuela in 2007 amid a nationalization of oil. The company is “monitoring developments in Venezuela,” ConocoPhillips said in a statement Sunday, adding that “it would be premature to speculate on any future business activities or investments.”
Exxon didn’t immediately respond to a request for comment Sunday. London-based Shell, which also previously operated in Venezuela, declined to comment.
Difficult to justify?
Increasing Venezuelan oil production to reimburse the U.S. government and oil companies or support the Venezuelan people would be no simple task.
Jorge León, head of geopolitical analysis at Rystad Energy, called a rapid recovery of Venezuelan oil production “highly unlikely.”
The country’s production infrastructure has eroded during years of chronic underinvestment, León said, and much of the skilled workforce has left the country.
Rystad estimates that it would take about $110 billion worth of investment to increase production from about 1 million barrels a day to 2 million barrels by early 2030. By comparison, the United States last year produced more than 13 million barrels of oil a day.
It is “difficult for international companies to justify new investments in Venezuela at present,” León said.
Still, Trump may be banking on such investments to help the country fix its economy and shield U.S. taxpayers from much of the cost.
Despite the obstacles, if the United States can ensure stability and Venezuela offers reasonable terms, ClearView said in an analysis Sunday that oil majors “seem unlikely to ignore more than 300 [billion barrels] of proved reserves.”
In addition to judging the stability of whatever regime emerges, Book said companies will want to know the terms under which they would produce the oil — how much they get and how they recoup their costs.
The Trump administration started to lay out some of the parameters Sunday.
Secretary of State Marco Rubio, speaking on CBS’ “Face the Nation,” said the country’s leaders need to build a stable business environment before anyone can benefit from an expansion of Venezuela’s oil industry.
“They need investment from private companies who are only going to invest under certain guarantees and conditions,” Rubio said.
Even if conditions improve in Venezuela, according to Rice’s Medlock, there’s a lot of other places across the globe that might be more attractive.
“They will still weigh those investments against other opportunities in the global marketplace,” Medlock said. “Hence, it will likely be a slow climb even if the risk profile improves.”
Some analysts are already zeroing in on signs that Trump may work with Delcy Rodríguez, who was Maduro’s vice president and has been overseeing the country’s oil industry.
But Trump has said Venezuela’s acting leader must cooperate with the U.S. or she could also face consequences.
While seen by some as a pragmatic move to maintain stability and get more oil flowing, other observers said that working with a leader who took office after an election widely seen as fraudulent won’t sit well with the Venezuelan people.
“It completely ignores the detail about democratic rule,” Clayton Seigle, a senior fellow at the Center for Strategic and International Studies, said in an interview Sunday. “That will not be favorably received by the Venezuelan people.”
Working with the remnants of the Maduro regime also sends a message that despite the rhetoric before Trump’s strike on Venezuela, the United States is deprioritizing human rights, drug trafficking and migration in favor of oil, said Roxanna Vigil, an international affairs fellow in national security at the Council on Foreign Relations.
“That sends a very clear message to the region and to the world that this really is about oil, and that the U.S. government is going to prioritize that,” Vigil said in an interview Sunday.
But if the Trump administration moves the country toward democratic elections or works with those commonly understood to have won the 2024 election, she said, “there’s more of a case to be made this is more nuanced” than oil and is “actually more about the stability of the region” and having democratically elected partners.
A lack of a “clear plan” for a democratic transition, Vigil said, invites a period of power struggle, violence and instability.
Rubio, in his interview with CBS, mocked the idea that new elections could be held 24 hours after Maduro was arrested.
He said the Trump administration wants Venezuela to be a completely different place. That can’t happen in “15 hours,” Rubio said, but did not offer a concrete timeline. Instead, he said the United States is watching those who retain power in the country.
“If they don’t make the right decisions, the United States will retain multiple levers of leverage to ensure that our interests are protected, and that includes the oil quarantine that’s in place,” he said.
But looking at the decisions made public so far, Seigle said the United States hasn’t laid out a clear path for the oil industry to start investing in the country.
“We don’t have anything from this weekend that engenders optimism for political stability in Venezuela, he said. “So, I don’t see any energy companies rushing in.”
Reporter Shelby Webb contributed.
This story also appears in Energywire.
