Industry experts have expressed skepticism over Donald Trump’s bullish prediction that US big oil firms will rapidly invest tens of billions of dollars to fix Venezuelan infrastructure and ramp up production after the rendition of the country’s president, Nicolás Maduro.
Without an “iron-clad guarantee” that the US federal government will fully reimburse them for the cost of rebuilding the country’s oil market, analysts expect global energy giants to proceed with extreme caution.
The US president has nevertheless insisted the oil industry will move quickly, boldly predicting that dominant US players could get an expanded oil operation “up and running” across Venezuela – reputedly home to the world’s largest crude oil reserves – in less than 18 months.
“I think we can do it in less time than that,” Trump claimed in an interview with NBC News on Monday. “But it’ll be a lot of money.”
In the face of such sweeping declarations, US oil firms such as ExxonMobil, ConocoPhillips and Chevron – the only US oil major still operating in Venezuela – have so far declined to publicly outline any such plans for investment.
“It would be premature to speculate on any future business activities or investments,” a Conoco spokesperson said this weekend. Hours earlier, Trump had stated at a press conference that “our very large United States oil companies” were poised to “go in, spend billions of dollars, fix the badly broken infrastructure and start making money for the country”.
The ambitious timeline laid out by Trump could prove unrealistic. “It’s probably going to take three years for any kind of production bounce,” said Dan Pickering, chief investment officer at Pickering Energy Partners, who expects an increase of around half a million barrels per day (bpd) by “2029, maybe late 2028”.
Energy firms will probably spend the first year sorting through new government and security contracts, he suggested, the second year investing in reconstruction, and only find themselves in a position to meaningfully increase output in the third.
“Either the US is going to step up with guarantees, or we’re going to spend six to 12 months watching the dust settle,” added Pickering, who noted that multinationals’ interest in Venezuelan oil does not necessarily correspond with their appetite to invest heavily in a country with an uncertain future.
“I think their interest is an eight, on a scale of one to 10,” he said. “I think their appetite is a four or five on a scale of one to 10, because there is no clarity yet.”
Seasoned operators in the region believe the firms will tread carefully. “I expect that you’ll see all of them now say, ‘This is fantastic, it’s a great opportunity, and we have a team ready to go to Venezuela,’” Elliott Abrams, who served as Trump’s special envoy to Venezuela during his first term, told Politico. “But that’s politics … That doesn’t mean they’re going to invest.”
Trump has repeatedly raised the prospect of oil giants being reimbursed by the federal government for any investments they make in Venezuela.
But the administration has yet to come forward with any detail on whether the US taxpayer will back them.
Only an “iron-clad guarantee” from the government that they will be repaid for “every dollar spent” will prompt oil companies to move more quickly, according to Pickering.
They want to “avoid getting screwed”, he said. “You need to be protected from sovereign risk, that we’ve seen in Venezuela already: you’ve got to protect against being nationalized again. You’ve also got to protect a different US administration in two years, saying: ‘I don’t think that’s a good idea, I’m not going to pay you back.’”
The bill would be vast. Columbia University’s Center on Global Energy Policy estimated that adding between half a million and a million bpd to Venezuelan oil production would require more than $10bn in investment over two to three years.
But an increase on the scale mooted by Trump and his allies is expected to need much more. The Center on Global Energy Policy said building back Venezuelan output to the same level as the early 2010s, near 2.5m bpd, was estimated to take between $80bn and $90bn over six or seven years.
Exxon, Chevron and Conoco did not respond to a request for comment on whether they were consulted ahead of Saturday’s attack. While the president said on Sunday that his administration had spoken to them before and after the operation in Venezuela, unnamed executives have refuted this claim in media reports.
Trump issued a hint to the industry roughly a month before Saturday’s operation, vaguely advising it to “get ready”, the Wall Street Journal reported, citing unnamed sources familiar with the matter.
