\n<\/p>\n
The Venezuelan oil industry has been \u201ca total bust\u201d for a long time, according to Donald Trump. After attacking Caracas and taking the country\u2019s leader captive, Trump promised to take control of Venezuela\u2019s oil industry with the help of America\u2019s biggest oil companies.<\/p>\n
Venezuela\u2019s beleaguered oil industry could \u201cmake a lot of money\u201d with the might of the US behind it, Trump told the press, claiming that the new regime would invest billions to revive its fortunes.<\/p>\n
Venezuela is believed to have the largest oil reserves of any country in the world. The exact reserves remain uncertain but the state claims they could be as large as 300bn barrels, easily surpassing those of Saudi Arabia. Other estimates suggest Venezuela\u2019s reserves of crude oil could represent about 17% of the world\u2019s total.<\/p>\n
But the South American country has only ever pumped a fraction of its potential production. When Hugo Ch\u00e1vez, the populist former president, rose to power in 1999, the country produced about 3.5m barrels of oil a day, making it one of the top 10 crude producers in the world at the time.<\/p>\n
A quarter of a century later, neglect, poor infrastructure, under-investment and corruption have eroded the country\u2019s oil industry and its economy. Venezuela\u2019s output is roughly 1m barrels a day \u2013 compared with the more than 13m barrels of crude produced daily in the US.<\/p>\n
Trump has promised that \u201cvery large\u201d US oil companies will spend billions of dollars to fix the \u201cbadly broken infrastructure\u201d.<\/p>\n
The oil companies potentially in line to invest include Exxon Mobil, the largest US oil company, and the Texas-headquartered Conocophillips, both of which were active in Venezeula\u2019s oil industry before it was nationalised by Ch\u00e1vez. Only Chevron, the US\u2019s second largest oil company, has continued to operate in the country.<\/p>\n
So far these companies have remained non-committal, with statements from ExxonMobil, Chevron and ConocoPhillips stopping short of confirming the US president\u2019s investment plans.<\/p>\n
Jorge Le\u00f3n, the head of geopolitical analysis at Rystad Energy, an industry consultancy, said: \u201cMy hunch is that if President Trump said this publicly, probably there was already an agreement with the US companies.\u201d<\/p>\n
Under the new regime, US oil companies could follow the playbook used in many developing nations by partnering with the state oil company, PDVSA, to develop and produce crude in exchange for a share of the profits. The parlous financial state of PDVSA means US companies are likely to be able to negotiate a good return on their investments.<\/p>\n
But even with a united effort of the US president and some of the world\u2019s biggest oil companies, success is not guaranteed. \u201cHistory shows that forced regime change rarely stabilises oil supply quickly, with Libya and Iraq offering clear and sobering precedents,\u201d Leon added.<\/p>\n
The vast majority of crude produced by Venezuela, about 80%, is exported via supertankers to China. The world\u2019s biggest oil importer takes the shipments as repayment for loans it extended to the country under Ch\u00e1vez.<\/p>\n
China is Venezuela\u2019s biggest lender and, while the total financial support is not known, some estimate that it could include $105bn in loans and other financial commitments to the South American nation between 2007 and 2016.<\/p>\n
By wresting control of Venezuela\u2019s oil industry, the US has in effect gained control of billions in expected repayments, and a key source of cut-price energy for China\u2019s developing economy.<\/p>\n
The Chinese foreign ministry has condemned the US actions. In a social media post it said it was \u201cdeeply shocked\u201d by the \u201cblatant use of force against a sovereign state and action against its president\u201d.<\/p>\n
Market observers have speculated that Venezuelan crude could now be redirected to US refineries in Louisiana. This would allow more US crude to be exported on the international market and boost Trump\u2019s mission to establish the US as a world-leading energy superpower.<\/p>\n
It is possible that any future oil shipments to China, produced by US oil companies, would be charged at prices closer to the market rate \u2013 a blow to Beijing\u2019s efforts to secure energy at the lowest possible cost.<\/p>\n
Trump told Fox News on Saturday that China would continue to receive crude shipments from Venezuela, but did not provide details.<\/p>\n
The events of this weekend are unlikely to have an immediate lasting impact on the price of crude oil or the cost motorists will pay at the pumps, according to experts at Third Bridge Energy, a US research company.<\/p>\n
Volatility is likely when oil trading resumes this week as traders weigh up the impact that a lifting of US sanctions against Venezuelan crude might have on the market against the instability caused by the regime change.<\/p>\n
It will take longer for any meaningful increase in the barrels produced by Venezuela to dampen market prices. A return to the country\u2019s crude production heyday at the turn of the century could take years, according to Peter McNally, the global lead analyst at Third Bridge.<\/p>\n
\u201cCan Venezuela\u2019s oil output recover?\u201d McNally asked. \u201cOur experts tell us the answer is yes but it will take tens of billions of dollars in investment and at least a decade of western oil majors committing to the country.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
The Venezuelan oil industry has been \u201ca total bust\u201d for a long time, according to Donald Trump. After attacking Caracas and taking the country\u2019s leader captive, Trump promised to take control of Venezuela\u2019s oil industry with the help of America\u2019s biggest oil companies. Venezuela\u2019s beleaguered oil industry could \u201cmake a lot of money\u201d with the<\/p>\n","protected":false},"author":1,"featured_media":40312,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[9566,1545,268,2658,2272,9956],"class_list":{"0":"post-40311","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-bust","9":"tag-industry","10":"tag-oil","11":"tag-play","12":"tag-role","13":"tag-venezuelas"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/40311","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=40311"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/40311\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/40312"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=40311"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=40311"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=40311"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}