News
16/03/26
Venezuelan investment prospects may be looking up
Caracas, 16 March (Argus) — Venezuela suddenly appears more investment-worthy,
with prolonged US attacks on Iran roiling crude markets. Some US oil firms held
off endorsing President Donald Trump's idea of pouring money into Venezuela in
the wake of the US' capture of President Nicolas Maduro on 3 January. ExxonMobil
called Venezuela "uninvestable" then. Now that the same US aircraft carrier that
supported the Maduro operation is embroiled offshore Iran, crude prices are
soaring and supply is pinched, ExxonMobil is suddenly starting to look at
getting "boots on the ground" in Venezuela , with its massive reserves of mostly
heavy crude. While the extent of the war and its effects on oil markets is
uncertain, the outlook has prompted a fresh look at reserves and the scope to
ramp up production in Venezuela. Chevron — for years the last US company
standing there — had already said it wants to increase its Venezuelan output of
250,000 b/d by about 50pc within two years, with a particular focus on the
Ayacucho 8 oil block. And less than a week after the attacks in Iran began,
Shell signed deals with Venezuela to reactivate oil fields and explore for gas
deposits. Few details were disclosed, but Shell has long been working to develop
Venezuela's offshore Dragon gas field, adjacent to the border with Trinidad and
Tobago. French firm Maurel & Prom in late February brought its first drilling
rig in eight years to Venezuela's conventional crude-producing region of Lake
Maracaibo, the company said on 11 March in Caracas. The US in mid-February
lifted restrictions on Maurel & Prom's oil and gas operations in Venezuela,
where it had been working before stricter US sanctions were imposed last year.
Italy's Eni and Spain's Repsol also plan to boost output in the country. The
state-controlled oil company of neighbouring Colombia, Ecopetrol, is also
seeking multiple waivers to do more business with Venezuela, and already has one
for its Houston office to trade Venezuelan crude. Sustained higher prices would
also prompt Ecopetrol to increase its oil production and capital investment
targets for 2026 overall, chief executive Ricardo Roa told investors. Power
struggle Oil services giants Schlumberger and Halliburton have said they are
eager to return to Venezuela. Baker Hughes has taken a more cautious stance,
wary of electricity shortages and other challenges. Industry participants inside
the country note the same bottlenecks. Venezuela could reasonably reach output
of 1.4mn b/d in 2026, up by roughly 300,000 b/d from now, based on announced
investment plans and US sanctions waivers, Venezuelan oil business association
president Reinaldo Quintero estimates. But pushing beyond 2mn b/d would require
at least 2,000MW of additional power capacity, he says. "And one new MW of
installed generation capacity costs about $1mn." Venezuela has 30,000MW of
nameplate power capacity, but only about half is usable , the government says.
Another hurdle is oil storage. Quintero estimates that of state-owned PdV's 40mn
bl of storage capacity, about 40pc is not fully usable because it requires
maintenance or faces other problems. Having ready storage is "very important for
Venezuela right now", Quintero says. Still — both for Venezuela and booming
nearby rival producers Brazil, Guyana and Argentina — plugging the gap in supply
from the Middle East brings more immediate challenges. Soaring freight rates
triggered by the virtual closure of the strait of Hormuz have made shipments
from Latin America less competitive , and cargoes harder to fix. But South
America was already growing in importance as a global crude supplier before the
war and latest events only reinforce this. By Carla Bass and Carlos Camacho Send
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