Growing Venezuela's nascent increase in crude production will take more time and billions of dollars, but early replumbing of its energy apparatus has begun.
Venezuelan crude output has ticked up by about 200,000 b/d since January to 1.2mn b/d in September, with 1mn b/d exported regularly and roughly half of that often headed to refineries on the US Gulf coast. But the moderate boost since the US lifted sanctions after its 3 January seizure of former Venezuelan leader Nicolas Maduro is starting to slow, and more output will take fresh investment.
Venezuela's government says it plans to sign 44 agreements in oil, gas or electricity by December, in addition to the 61 it has already signed this year. A third stage of talks with an opposition-led alternate assembly that US secretary of state Marco Rubio says are key to democratic elections also resumed last week. The US lifted sanctions on acting assembly head Jorge Rodriguez — brother to interim president Delcy Rodriguez — just before the talks restarted.
Legislation on issues such as pollution from tankers continues to wind through the assembly as well. And the national assembly is readying a final debate on electricity law reforms meant to end power outages that trouble oil production and hurt the population. But Venezuela is still "a long way" from where it needs to be to draw more investment, ConocoPhillips chief executive Ryan Lance told the Energy Intelligence Forum in London this month. "We're not interested in putting... [millions of] dollars of investment back into the country," he says.
Venezuela still owes ConocoPhillips $12bn from the expropriation of assets in 2007-08. And Caracas' recent hydrocarbon law reforms and new contract structures do not provide adequate investor certainty, Lance says, adding that he has no such concerns about the company's recent upstream deals in Iraq.
Chevron was the only US company to stay in Venezuela after Caracas' expropriations and it now faces a different calculation. "We made the decision to stay and it put us in a position where now... we're advantaged," Chevron chief executive Mike Wirth said at the same forum. Chevron produces 300,000 b/d of crude in three joint ventures with state-run PdV and aims to double that in five years with $7bn. Expanding output in other areas lacking infrastructure may cost more, Wirth said.
But several smaller and newer companies are placing their bets on Venezuela, despite the challenges. Two drilling rigs have arrived in Venezuela to support Barbados-based North America Blue Energy Partners' plans to grow its 200,000 b/d of production by fivefold under a US-brokered deal.
Where's the beef?
Brazil's Fluxus Energy aims to increase output in its Petrororaima extra-heavy crude joint venture with PdV by fourfold to 100,000 b/d in the next three years, a company source says. Brazilian brothers Wesley and Joesley Batista of global food processor and meatpacker JBS are the owners. And Californian independent Pacific Coast Energy plans to double output in its heavy crude Venezuelan fields to 40,000 b/d by the end of 2027 under a recently signed deal with PdV.
Even cryptocurrency entrepreneurs are entering Venezuela's oil patch, with Coinbase cofounder Fred Ehrsam also cofounding energy firm Primavera, which has signed a deal with PdV. It has hired former staff from Chevron and US independent Occidental to "rapidly scale crude oil development in its fields", Primavera says.
Critical uncertainties remain, including if Venezuela will regain control of its biggest international asset, US refiner Citgo. It is in limbo in a US court-ordered auction process. And despite the rush of interest from upstream newcomers, "you're going to have to see more companies like [Chevron] come in" for Venezuela to return to its past peak of 3mn b/d, Wirth said.
