Former President Donald Trump has lauded a new oil accord with Venezuela as potentially "the greatest deal ever made," which effectively grants the U.S. control over a substantial portion of Venezuela's crude wealth. However, some U.S. oil executives have expressed skepticism.
This agreement involves the displacement of operators previously sanctioned by Washington from 17 oil fields. The Venezuelan government is ceding these fields to a partnership between the U.S. and North American Blue Energy Partners (NABEP), a company led by Venezuelan businessman Alejandro Betancourt. Betancourt has been instrumental in assisting the Trump administration in attracting smaller American oil explorers to Venezuela. The U.S. estimates that the fields included in this deal hold proven reserves of approximately 65 billion barrels, comprising both underexploited "greenfields" and long-producing "brownfields." Half of these fields are located in the Orinoco Belt, and the other half in Zulia state.
The U.S. government has secured a 35% equity stake in NABEP's parent company through the Pentagon's Office of Strategic Capital. This stake is projected to yield value and dividends potentially worth hundreds of billions of dollars for the U.S. Additionally, the U.S. has obtained the right of first refusal for about 80% of NABEP's oil production, which will be supplied at production cost. The deal also grants the U.S. Department of State a guaranteed 20% of NABEP's output from current and future fields, ensuring a consistent supply of low-cost oil. The U.S. will also have veto power over board appointments at NABEP, with most board members required to be U.S. citizens.
Trump stated that this oil will be refined in the U.S. to replenish emergency reserves. NABEP aims to increase production from its Venezuelan operations in Lake Maracaibo and the Orinoco Belt to over 1 million barrels per day, a significant increase given Venezuela's current daily production of around 1.1 million barrels. This ambitious target faces challenges due to decades of underinvestment and corruption in Venezuela's oil infrastructure. The agreement also faces potential political hurdles, including doubts about its acceptance by future U.S. presidents or its resilience to political instability in Venezuela. Chevron, another U.S. oil giant, plans to invest $7 billion over the next five years to more than double its crude production in Venezuela, targeting 600,000 barrels per day by 2031. Italy's Eni will begin drilling operations in the Junín 5 block, which holds over 35 trillion cubic feet of natural gas.
