President Donald Trump is celebrating the U.S. attack on Venezuela as a victory for control of that country’s oil reserves. “We’ve taken $4 billion of oil in one day,” he said Thursday on Fox News. “That will increase.” However, it is unclear whether American oil companies are willing to undertake the effort and expense of rebuilding Venezuela’s petroleum industry.
Venezuela’s “huge reserves of crude oil” are not necessarily a “tantalizing prospect for private investors,” said Politico. “Tens of billions of dollars” will be required over the next decade to rebuild the country’s “aging facilities,” a task complicated by the fact that the country’s crude oil reserves require “more expensive processing work” than oil from other sources. Privately, at least, many oil company executives are saying it might be difficult to make the project profitable. The numbers for a big investment “currently do not add up.”
U.S. oil companies like Exxon Mobil and ConocoPhillips have been “burned in Venezuela before,” said The New York Times. The bigger factor, though, might be that oil prices have “fallen more than 20% in the past year.” Despite the removal of former leader Nicolás Maduro, the country remains fragile. Few oil companies will “rush to go into an environment where there’s not stability,” said former Chevron executive Ali Moshiri.
The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
SUBSCRIBE & SAVE
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Latest Videos From
“The math simply does not work,” said Ed Hirs at The Houston Chronicle. Control of Venezuelan oil will not benefit oil companies or consumers. The break-even cost of extracting and processing the country’s oil is roughly $80 a barrel. West Texas crude, meanwhile, currently sells at under $57 a barrel. The bottom line is that it “will cost more to produce Venezuelan oil than it could sell for.” There is “little upside for consumers or taxpayers” in such an effort, and especially not for independent Texas oil companies, who “would see their taxes used to create a new competitor.”
Trump is offering U.S. oil companies a “poisoned chalice,” said Ron Bousso at Reuters. Those companies are “no strangers to political risk,” operating in places like Libya, Iraq and Angola over the years. But the current situation in Venezuela “looks like more trouble than it’s worth” until the government stabilizes and can be depended upon by firms looking to make an investment. It may be “tempting” to access the country’s resources, “but it’s a lot less attractive if you can’t trust the contract.”
What next?
Oil company executives met Friday with Trump, and their skittishness was clear. The big corporations “aren’t going to be bullied into spending money in a risky country or with risky terms,” said Dan Pickering, the founder of Pickering Energy Partners, to CNN. Trump said this week that U.S. taxpayers might reimburse companies for their investments in Venezuela. “A tremendous amount of money will have to be spent,” the president said per NBC News, and oil firms will be “reimbursed by us or through revenue.”
