President Donald Trump’s proposed oil accord with Venezuela is more of a geopolitical wager than an immediate solution.
The White House and Delcy Rodríguez’s interim government have announced a 25- to 100-year project that would give the US majority control over 17 fields containing 65 billion barrels of recoverable reserves. Rodríguez said the project targets more than 1.5 million barrels a day.
It’s clear logic for the US: securing Western Hemisphere barrels far from Middle East uncertainty and rebuilding the Strategic Petroleum Reserve. For refiners along the U.S. Gulf Coast, the prize is equally strategic. Venezuelan crude is an unusually close fit for plants built to process heavy, sour oil.
But the agreement, even if it survives the politics around it, is no quick fix for fuel prices, and a bet made in one of the world’s most difficult upstream environments.
‘Peanut Butter Crude’
Not all crude oil is made equal. Venezuelan crude oil from the Orinoco Belt is so dense it is often compared to peanut butter.
It has viscosity that needs upgraders, steam injection, diluents, and coking capacity just to move it through the system. Years of underinvestment, sanctions, and instability have left much of that system degraded or idle.
Greenfield development may take seven to 10 years, while Lake Maracaibo assets require repairs before delivering sustained increases, and estimates range from $100 billion to $180 billion. Tankers have reportedly waited up to 30 days to load amid power outages, crude-quality issues and limited storage flexibility.
"The idea is great. The challenge is going to be implementation, human capacity, operational experience," former Chevron executive Ali Moshiri warned.
Opaque Circumstances Create Risk
Venezuela is currently revising its hydrocarbons framework and migrating contracts.
According to Reuters, Rodríguez has said the structure complies with Venezuelan law and would leave Caracas with nearly $19 per barrel in taxes and royalties – a sum that Francisco Monaldi, a fellow in Latin American energy policy at Rice University, deemed "incredibly low."
Luisa Palacios of Columbia University warned that the transaction could instead be "further weakening the country’s already fragile institutional framework," while Juan Carlos Apitz, head of Central University of Venezuela’s law faculty, said the agreement could later be challenged in court.
The Larger Message Goes Beyond Venezuela
Canada supplies 60% of the U.S.’s imported oil. Alberta’s heavy oil is a natural substitute for Venezuelan grades, and TD Economics estimates the Gulf Coast accounts for roughly 10% of Canadian oil exports to the U.S. A meaningful Venezuelan recovery could pressure Western Canadian Select pricing and encourage Canada to accelerate efforts to develop alternative export routes.
Out of major producers, Chevron (NYSE:CVX) arguably has the clearest path into the new framework. The company is already in negotiations to migrate its joint ventures into Venezuela’s revised energy structure and secure broader operational control. A logical next step would be to expand its flagship Petropiar heavy-crude project into the adjacent Ayacucho 8 block and other Orinoco acreage.
Still, Moshiri noted that the first wave of investment is likely to come from midsize operators and specialized partnerships rather than the biggest names in oil. Repairing brownfield assets in a high-risk jurisdiction takes flexibility, technical focus and a tolerance for uncertainty that many mega-majors lack.
Meanwhile, Exxon Mobil (NYSE:XOM) is unlikely to move without formal security guarantees and stronger bilateral legal protections.
Even so, reserve replacement is a geopolitical necessity, and Venezuela remains one of the few places that can answer that call at scale.
Image: Shutterstock
Login to comment