President Donald Trump announced on Friday an agreement for the U.S. to take majority control of over 65 billion barrels of Venezuela's proven oil reserves, representing about 20% of the country's total. This unprecedented move aims to revive Venezuela's struggling energy sector and potentially provide a new source of crude to help lower U.S. fuel prices. The deal involves a partnership with private businesses, though specific details remain scarce. Venezuela, which holds the world's largest proven oil reserves, currently produces only about 1.25 million barrels per day, a stark contrast to its peak of 3.5 million bpd in the late 1990s, due to years of underinvestment, mismanagement, and sanctions.
The agreement, which Venezuelan interim President Delcy Rodriguez stated is a 25-year deal, is expected to bring nearly $100 billion in private-sector investment to develop 17 oil fields. These fields are primarily located in eight blocks within the Orinoco Belt, with others in the Lake Maracaibo region. Rodriguez anticipates an initial boost in production to 1.5 million barrels per day. However, analysts like Francisco Monaldi of Rice University and Rebecca Bill Chavez of the Inter-American Dialogue note that many of these reserves are not fully proven, and the fields in the Orinoco Belt lack adequate infrastructure, suggesting it could take five to seven years to see increased production.
Despite the significant announcement, experts are skeptical about the deal's immediate impact on global oil markets or U.S. gas prices. The Venezuelan oil infrastructure is in disrepair, and Rystad Energy estimated in January that returning the country to its peak production would require approximately $180 billion in investment by 2040. Questions have also arisen regarding the source of the $100 billion in private investment, especially since the named private operator, North American Blue Energy Partners, is not large enough to fund it independently. The White House has confirmed that taxpayer money will not be used.
The legal and political durability of the deal is also uncertain. No formal agreement has been published, leading to questions about its conformity with Venezuelan law and how future governments in both countries might view it. The U.S. role in selecting operating companies has also raised concerns about sovereignty and legality. While the agreement offers a political win for the Trump administration ahead of midterm elections by projecting an effort to boost energy supply, the practical challenges, including securing substantial capital and overcoming operational hurdles, suggest that any material increase in Venezuelan output will take years and significant commitment from international energy companies.
