Trump Revives Venezuela’s Oil Industry—a $100 Billion Gamble

According to a Xinhua News Agency report, the U.S. White House has asked major U.S. oil companies to make large-scale investments in Venezuela and repair the country's crude oil extraction infrastructure.

Amid political turmoil in Venezuela, the U.S. is seeking to take the lead in reviving the country’s oil industry, but this will be a long-term challenge that could cost hundreds of billions of dollars and is fraught with uncertainty. Rebuilding Venezuela's oil infrastructure and restoring its output to peak levels is expected to require investments of about $10 billion per year over the next decade, with a total cost likely to exceed $100 billion.

According to Francisco Monaldi, Director of Latin American Energy Policy at Rice University's Baker Institute for Public Policy, after years of corruption, under-investment, fires, and theft, Venezuela’s crude oil infrastructure is in tatters. To restore output to the peak levels of the 1970s, companies like Chevron, ExxonMobil, and ConocoPhillips would need to invest about $10 billion a year over the next decade.

Former manager of Venezuela’s state oil company Lino Carrillo emphasized that before companies seriously consider investment, they must be sure of stability in the country, which would require a new parliament or national assembly, rather than the current chaotic situation.

Venezuela possesses the world’s largest oil reserves, but under Maduro’s 12-year rule, output has plummeted. According to a CCTV News report, Maduro was captured by U.S. forces last Saturday.

The country's current daily output is about 1 million barrels, far below the nearly 4 million barrels in 1974. For investors, the workload of infrastructure repairs is enormous, sanctions remain in place, U.S. naval forces have blockaded the surrounding waters, and the path for political transition remains unclear.

Infrastructure: Comprehensive Collapse from Ports to Pipelines

The physical condition of Venezuela’s oil supply chain is extremely poor, presenting the most immediate obstacle to revitalization plans.

In the Orinoco Basin, a vast region estimated to hold nearly 500 billion barrels of recoverable oil, drilling platforms have been abandoned and oil leaks go unchecked. Drilling platforms are even raided in broad daylight, with components sold on the black market. The country’s vast underground piping network is notorious for leaks, and in some cases, the state oil company has dismantled piping and sold it as scrap.

Additionally, the massive Paraguana refining complex on the northwest coast near Caracas can only operate intermittently and at low speeds due to equipment failures, and some formerly state-of-the-art crude upgrading facilities have already shut down.

Political Deadlock: Top Concern for Investors

Despite Trump saying that Venezuelan Vice President Delcy Rodriguez is currently in charge of the country, her status as a staunch ally of Maduro has not brought enough confidence to the market. Lino Carrillo stated bluntly in an interview: "Any oil company that wants to take investment in Venezuela seriously must have a new parliament or national assembly. Definitely not what is happening now."

Clayton Seigle, Senior Fellow at the Washington Center for Strategic and International Studies, said it is expected that oil companies will begin updating their participation plans and proposals, but without fundamental political stability, they will not make substantial commitments.

Currently, Chevron is the only major U.S. oil company still operating in Venezuela, accounting for about 25% of the country's total output and operating under a special license. The company said in a statement that it will continue to fully comply with all relevant laws and regulations, with a focus on staff safety and asset integrity.

Besides internal factors, the external market environment is also unfavorable for massive capital injections. Analysts note that ExxonMobil and ConocoPhillips, due to their scale and experience, are the two American companies most capable of helping rebuild Venezuela. However, both withdrew after their assets were nationalized by Chavez, Maduro's predecessor, in the mid-2000s, and still have billions in outstanding loans and compensation claims.

Risk Warning and DisclaimerThe market carries risk, so investment requires caution. This article does not constitute personal investment advice and does not take individual users’ special investment objectives, financial circumstances, or needs into account. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investment based on this article is at your own risk.