(Bloomberg) — President Donald Trump is framing the deal for a US stake in 65 billion barrels of Venezuelan oil as a victory that will lower gasoline prices and replenish depleted crude reserves. It’s far from certain the plan will lead to either during his presidency — if at all.
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Trump pushed for a blockbuster move after growing frustrated that private oil companies, including ExxonMobil Holdings Corp. and ConocoPhillips, weren’t moving quickly enough to boost production in Venezuela, according to people familiar with the matter. By starting a new venture directly controlled by the US, his administration is seeking to give producers more confidence to commit to developing the 17 oil fields involved in the deal.
But the White House hasn’t explained where the $100 billion in expected investment for the deal is supposed to come from. While Trump has been explicit that it won’t be from taxpayers, the private operator working with the US on the deal, North American Blue Energy Partners, isn’t large enough to put that kind of money in by itself.
All those questions point to deeper concern that the deal may meet the same fate as some of Trump’s other major initiatives — including the Gaza peace plan and an Iran ceasefire — that never came to fruition.
“It depends on who signs, if they are actually going to invest and, of course, what type of contracts are we talking about?” said Francisco Monaldi, director of Latin American energy policy at Rice University in Houston. “Most of these are not properly proven reserves.”
The gap between the deal’s immediate political value and its likely effect on oil supply is particularly important with November’s midterm elections approaching, with the Trump administration under pressure to lower gasoline prices. The agreement gives Trump an energy win he can claim now, even though increasing Venezuelan output will require years and substantial capital, said Rebecca Bill Chavez, president and chief executive officer of the Inter-American Dialogue.
“The political narrative is running well ahead of what Venezuela can deliver at the pump in the near term,” Chavez said.
The White House didn’t immediately respond to a request for comment. Vice President JD Vance said Monday that rising production in Venezuela is one reason crude prices have not risen more recently.
“They’re obviously higher than they were a few months ago,” Vance told reporters at Joint Base Andrews in Maryland. “But they’re sort of much more stable, in part because of what we see coming out of Venezuela.”
To be sure, the US is finding some demand to develop other oil fields not involved in its own venture. US Energy Secretary Chris Wright is set to visit Caracas later this week, when officials are expected to showcase more than a dozen oil and gas agreements, including previously signed contracts and memorandums of understanding that could be completed during the trip, according to people familiar with the plans. These will be separate from the direct US stake Trump unveiled last week.
Wright’s visit is intended to show that investment in Venezuela’s capital-starved oil industry is picking up after an expected wave of projects failed to materialize following the capture in January of strongman Nicolás Maduro. The push is motivated more by US domestic politics than developments in Venezuela, with members of the Trump administration under growing pressure to demonstrate results, according to one person familiar with the matter who asked not to be identified discussing confidential talks.
Disruptions to supplies through the Strait of Hormuz have pushed up US fuel prices ahead of November’s midterm elections. The flurry of deals the Trump administration is pursuing is intended in part to show progress in Venezuela and deliver a political and market win as the war in Iran drags on, the people said.
Chevron Corp., the only US oil major operating in Venezuela is negotiating to add two heavy-oil fields to its existing operations there, while Bogota-based oil and gas producer GeoPark Ltd.’s plans to take over the Bare field in the Orinoco Oil Belt, according to people familiar with the deals.
Hunt Oil Co., a privately held Dallas-based producer, has already signed an agreement to develop the Caro and Carisito fields. In a speech televised on Venezuelan state TV, acting President Delcy Rodríguez also named Chevron, Repsol, Eni SpA, Shell Plc and BP Plc as companies expected to participate in additional oil and gas agreements.
Rodriguez wants to increase production past 1.5 million barrels of oil a day, which is about 30% higher than current levels. Even then, it would less than half the nearly 3.5 million barrels a day the country was producing in the late 1990s, before Chavez nationalized the industry. And the challenges are vast.
Many of the 17 fields the US is pushing to develop have little infrastructure and unreliable electricity. It could take billions of dollars to fix them, with repairs dragging beyond Trump’s term, which ends in January 2029.
The political and legal uncertainties are daunting, too. It’s unclear whether whoever succeeds Trump in the White House will stick to his strategy in Venezuela. And in Caracas, there’s no guarantee that whatever leader comes after Rodríguez’s will remain as cooperative with the US.
Hence oil companies, especially large ones, are moving with caution.
“We see limited appetite among US energy majors to deploy capital in Venezuela at the scale or pace targeted by the US administration,” Vincent Piazza and Justin Teresi said. “Unresolved legacy claims and deep investor anxiety will continue to cap near-term capital commitments from US operators.”
Even so, a visible pipeline of projects could help convince markets that more Venezuelan crude will eventually become available, supporting the administration’s effort to reassure markets about future supply.
–With assistance from Kevin Crowley and Skylar Woodhouse.
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