For months, the U.S. sold its pressure campaign against Venezuela as a way to curtail drug trafficking. Now, it’s about getting American energy companies access to one of the world’s largest oil bounties.
The Trump administration’s move to oust Venezuelan strongman Nicolás Maduro in a surprise military operation early Saturday will pave the way for U.S. oil companies to regain a foothold in the South American nation, President Trump said at a Mar-a-Lago press conference.
“We’re going to have our very large United States oil companies, the biggest anywhere in the world, go in, spend billions of dollars, fix the badly broken infrastructure, the oil infrastructure, and start making money for the country,” he said.
But getting foreign companies to flock back to Venezuela will be a massive challenge. Chevron is the only major U.S. oil company there and is the country’s largest foreign investor . Other oil executives will be forced to gauge the stability on the ground in a country where the industry has fallen into disarray after more than two decades of mismanagement and corruption.
The other obstacle facing Trump’s effort to put more of Venezuela’s viscous crude into the global market is that the world doesn’t have much of an appetite for more oil. U.S. oil prices are languishing below $60 a barrel, a level that discourages investment for most American producers. Global supplies are expected to continue rising this year.
“One thing that works against it is the price of oil,” said Ali Moshiri, the former head of Chevron’s operations in Latin America and Africa. “In the environment we’re in, if you’re going to invest, do you put it in the Permian [Basin in the U.S.] or do you put it in Venezuela? That’s going to be a tough choice.”
The U.S. hasn’t detailed the mechanics of how it would bring more American oil companies into Venezuela to boost production. Analysts say it could facilitate a process that would allow companies to bid for oil and gas blocks and question whether European companies could also bid for the right to enter the country.
Chevron said in a statement Saturday that it is focused on the safety of its employees and the integrity of its assets in the country. The company and its joint ventures employ about 3,000 people there.
Venezuela has produced some 900,000 barrels of oil a day this year, with Chevron pumping about one-third of that. The type of crude Venezuela produces is thicker than most oil consumed on the global market, and refiners from the U.S. Gulf Coast to China and India can wring more profit out of it than other grades of crude, making it highly attractive for fuel makers.
In the U.S., the shale boom unleashed record levels of oil production, but the kind of oil American frackers are pumping doesn’t work as well as heavy crude produced in Venezuela, Canada and Mexico. Venezuela’s government says its proved oil reserves top 300 billion barrels, which, if true, would make its bounty the world’s largest.
Other big oil companies that are potentially interested in re-entering Venezuela will almost certainly take time to evaluate the situation because the country has a track record of appropriating oil assets, as it did in the 1970s and the 2000s, analysts said.
ConocoPhillips and Exxon Mobil pulled out of Venezuela in 2007 after then-President Hugo Chávez nationalized their assets. Conoco later sued the Venezuelan government for more than $20 billion; Exxon sued for $12 billion. The companies were awarded fractions of their losses in protracted arbitration proceedings.
Conoco and Exxon didn’t immediately respond to requests for comment.
“Oil companies always want oil, and Venezuela has a lot of it,” said José Ignacio Hernández, a law professor, consultant and public-debt expert at Aurora Macro Strategies. “But they need political stability, which requires more than just removing Maduro. The situation is still ongoing.”
Orlando Ochoa, a Caracas-based economist and a visiting fellow at the Oxford Institute for Energy Studies, described the Herculean task of jump-starting the moribund energy industry, which has seen tens of thousands of trained professionals flee the country under Maduro’s authoritarian rule.
He said that includes drafting a broad economic stabilization plan to attract the financing Venezuela badly needs from multilateral lenders to rebuild infrastructure and rusted oil-field installations. Local laws need to be modified to allow private energy firms to operate without state overreach, he added. And the government has to restructure some $160 billion in debt and settle pending arbitration cases with foreign companies to convince them to come back.
“What the U.S. needs to do is to implement a form of a Marshall Plan,” said Ochoa, referring to the economic program that helped rebuild Europe after World War II. “This is about much more than coming into the oil and gas sector just to extract crude from the ground.”
One American oil executive with a long history of working in Venezuela said the U.S. government may have done the easy part by removing Maduro. But it remains to be seen whether a transitional government could grant the security and stability needed for foreign oil companies to return to Venezuela en masse, the executive said.
On Saturday, as questions were still emerging about how Venezuela’s government would function and America’s role in the country, Trump kept turning back to the country’s oil.
“We are going to be taking out a tremendous amount of wealth out of the ground,” Trump said during the press conference. He added that the U.S. would keep some of the proceeds “in the form of reimbursement for the damages caused us by that country.”
The rationale for the incursion illustrated how the president has long viewed oil as both a spoil of war and hard-edge tool for projecting American power. For years, Trump has said the U.S. should have laid claim to other countries’ oil as part of incursions in Syria, Libya and Iraq, either to pay for military costs or to offset adversaries’ influence.
“It used to be to the victor belong the spoils,” Trump said in a 2016 presidential forum. “Now, there was no victor there [in Iraq], believe me. There was no victor. But I always said: Take the oil.”
Write to Collin Eaton at collin.eaton@wsj.com , Kejal Vyas at kejal.vyas@wsj.com and David Uberti at david.uberti@wsj.com
