Former U.S. President Donald Trump has proposed a minimum $100 billion investment from the U.S. oil industry into Venezuela, stating that companies would engage directly with the U.S. government rather than Venezuela. These proposals followed the apprehension of Venezuelan leader Nicolás Maduro and discussions regarding the recovery of assets U.S. companies claim were seized. However, major oil executives, including ExxonMobil's CEO, have expressed caution, describing Venezuela as "uninvestable" under current conditions, while the U.S. administration outlined plans to manage Venezuelan oil sales. Concurrently, Venezuela's legislature has advanced a bill aiming to attract private investment by loosening state control over the oil sector.
Overview of U.S. Proposals and Policy
Former U.S. President Donald Trump called for the American oil industry to invest at least $100 billion in Venezuela. He indicated that U.S. firms would deal directly with the U.S. government, which would determine operating companies, rather than engaging with Venezuelan authorities. President Trump also stated that a benefit for the United States would be lower energy prices.
U.S. Secretary of State Marco Rubio announced plans for the U.S. to sell 30 to 50 million barrels of already produced Venezuelan oil, with the revenue intended to benefit the Venezuelan people and stabilize the economy. The White House indicated intentions to "selectively" roll back U.S. sanctions on Venezuelan oil sales and coordinate with interim authorities, controlling these sales and depositing funds into U.S.-controlled accounts to maintain leverage.
President Trump signed an executive order to prevent the judicial seizure of Venezuelan oil revenue held in U.S. Treasury accounts, declaring a national emergency. The order specified that these funds are held for "sovereign purposes" and are not subject to private claims, asserting that attempts to seize them would harm U.S. national security and foreign policy efforts to ensure Venezuela's stability. The legal basis cited included the 1977 International Emergency Economic Powers Act and the 1976 National Emergencies Act.
Historical Context of Venezuela's Oil Industry
Venezuela possesses the world's largest proven oil reserves, estimated at over 303 billion barrels, approximately 17% of the global supply. Its constitution declares national ownership of all mineral and hydrocarbon deposits. Experts affirm that Venezuela's oil has always belonged to the nation.
The country's oil industry has a history of nationalization, beginning in 1975 when President Carlos Andrés Pérez signed a bill creating Petróleos de Venezuela S.A. (PDVSA). In 1976, foreign oil companies' dominance ended, with affected companies receiving approximately $1 billion in compensation.
In the 1990s, Venezuela invited foreign companies back to boost oil production. However, in 2007, under then-President Hugo Chávez, the government mandated that PDVSA take a minimum 60% majority stake in foreign oil projects. Companies that did not comply, such as U.S.-based ExxonMobil and ConocoPhillips, had their assets seized after they withdrew from the country. Other companies, including U.S.-based Chevron, agreed to the new terms and continued operations. The U.S. State Department at the time acknowledged Venezuela's right to make these decisions but hoped for fair compensation for the affected companies.
U.S. Oil Company Involvement and Compensation Claims
Following the 2007 nationalizations, ExxonMobil and ConocoPhillips pursued international arbitration, resulting in billions of dollars in awards. However, these companies state that only a fraction of these amounts has been paid. The World Bank, for instance, ruled that Venezuela owed ConocoPhillips $8.7 billion for 2007 asset seizures, while an arbitration panel largely annulled a prior award to Exxon. Companies have filed at least 60 arbitration claims against Venezuela since the 2000s, with estimated liabilities ranging from $20 to $30 billion.
Currently, Chevron is the only major American oil firm operating in Venezuela, doing so under a specific U.S. license. Companies from other countries, such as Spain's Repsol and Italy's Eni, also maintain operations.
Industry Response to Investment Call
U.S. President Trump met with oil executives, including those from ExxonMobil, Chevron, and ConocoPhillips, to discuss potential investments. While executives acknowledged Venezuela's significant oil reserves, they expressed caution.
Darren Woods, Chairman and CEO of ExxonMobil, stated that Venezuela is currently "uninvestable" due to existing legal and commercial frameworks, citing past asset seizures. He indicated that "pretty significant changes" would be required for the company to consider re-entering Venezuela for a third time, including durable investment protections and reforms to the country's hydrocarbons law.
President Trump expressed dissatisfaction with ExxonMobil's response, indicating he might keep the company out of Venezuelan oil investment efforts. Following these remarks, ExxonMobil shares experienced a decline in premarket trading.
Industry analysts cautioned that many companies might be hesitant due to the significant risks involved. David Goldwyn, president of Goldwyn Global Strategies, suggested that major companies would not invest billions without physical security, legal certainty, and a competitive fiscal framework, calling the $100 billion figure "fantastical."
Venezuela's Legislative Efforts
Venezuela's legislature has advanced a bill to reform the country's oil sector, marking the first major proposed overhaul since the 2007 nationalization. The legislation aims to:
- Formally reduce state control over oil reserves.
- Create opportunities for private companies to invest and independently operate oil fields.
- Allow companies to market their own crude output and collect cash revenues through contracts with PDVSA.
- Establish international arbitration for investment disputes, offering companies an alternative to local courts.
- Potentially reduce royalties from 30% to as low as 15% and cut extraction taxes to encourage investment in challenging projects.
The bill represents a shift from the resource nationalism that characterized previous administrations, with proponents stating it aims to "allow an accelerated increase in production" and ensure oil remains a driving force for the country's development by attracting private investment with legal guarantees.
Future Prospects and Challenges
Energy experts generally concur that future investments in Venezuela would require significant improvements in governance, restoration of the rule of law, and an easing of U.S. oil sanctions. Should these reforms be implemented and sanctions lifted, oil production in Venezuela, which has plunged from over 3 million barrels per day to 800,000-1 million barrels per day due to chronic underinvestment, mismanagement, and sanctions, could increase.
However, concerns remain among potential investors regarding financial and legal risks, political uncertainty, and the lack of a timeline for democratic elections. Experts suggest that addressing the existing arbitration claims could involve inviting investors back through debt-for-equity swaps or linking future oil production to debt repayment, potentially requiring a restructuring of foreign obligations. Rystad Energy estimates that $8 billion to $9 billion in new investments annually would be needed to triple production by 2040, a scale likely requiring subsidies and political stability, and not expected to lower U.S. oil prices in the near future.