President Donald Trump's announcement of a massive oil deal with Venezuela, which aims to grant the U.S. access to 65 billion barrels of Venezuelan recoverable oil, is meeting with widespread doubt from energy experts and legal professionals. This volume surpasses the total U.S. proved oil reserves of $46 billion barrels. Venezuelan interim President Delcy Rodriguez stated the pact would last at least 25 years, securing $100 billion in investment and $209.3 billion in royalties and taxes, potentially yielding Venezuela around $19 per barrel. However, the deal's legality is being questioned, particularly since the U.S., not Venezuela, will select the operating companies, and it may face future legal challenges.
The viability of increasing Venezuelan oil production is highly contentious. While Venezuela possesses vast reserves, primarily in the undeveloped Orinoco Oil Belt, the crude is heavy, tar-like, and expensive to extract, requiring a break-even price of $80 per barrel for new fields. The country's current production is only around 1.2 million barrels per day, a sharp decline from its late 1990s peak of 3.5 million bpd, due to years of mismanagement, sanctions, and infrastructure decay. Rystad Energy estimated that $180 billion in investment would be needed by 2040 to restore Venezuela to its peak production levels.
Analysts largely agree that the deal will have no immediate impact on U.S. gasoline prices or Venezuelan production for years to come. Experts like Andy Lipow and Goldwyn suggest it would take five to seven years, at best, to see increased production from the Orinoco Belt, given the lack of infrastructure. There are significant political risks, with concerns that a future U.S. Democratic president or a different Venezuelan government could terminate the agreement. Chevron is the only major U.S. oil company active in Venezuela, while others like ExxonMobil have expressed disinterest, calling the country "uninvestable."
Even with the proposed $100 billion in private-sector investment, securing capital and technical expertise will be challenging. The deal's structure, involving a 35% U.S. stake in a company run by Venezuelan businessman Alejandro Betancourt and rights to 20% of production at cost, raises questions, especially the use of controversial "penny warrants." Furthermore, U.S. refineries on the Gulf of Mexico are already operating near 95% capacity, and the U.S. strategic petroleum reserve cannot store Venezuela's heavy oil. The lack of a formal, transparent agreement further complicates its long-term stability and attractiveness to international energy companies, who require confidence in the framework before committing significant capital.
