News
27/03/26
IOCs temper Venezuela investment expectations
IOCs temper Venezuela investment expectations
Election timelines remain unknown and upstream investment terms still fall short
of requirements, write Carla Bass and Stephen Cunningham Houston, 27 March
(Argus) — The White House and the Venezuelan opposition say that the US'
intervention will lead to significant and lasting change for Venezuela and its
oil sector. For international oil companies, the proof will be in Venezuela's
investment environment. Washington's control over Venezuelan oil funds will
ensure the government in Caracas remains aligned with the US and international
investor interests until fair elections can be held, US energy secretary Chris
Wright told the CERAWeek by S&P Global event in Houston, Texas, this week. "It's
not a Jeffersonian democracy yet, but it's meaningfully better than it was three
months ago," he said. The US seized former president Nicolas Maduro on 3
January, accused him of widespread election fraud and drug trafficking, and put
his vice-president, Delcy Rodriguez, into power. Washington has since eased
sanctions on Venezuela's oil industry and obliged market participants to make
payments through US-controlled accounts. It has demanded that Venezuela open its
oil and other commodity sectors to investment. Caracas has passed a new
hydrocarbons law , but further reforms are still needed to improve its
international arbitration allowances. Venezuelan opposition leader Maria Corina
Machado appears understandably impatient for the free and fair elections that
she hopes will shortly pave the way for democracy in the country, as well as
transform and privatise Venezuela's oil sector after decades of decline. The US
has yet to set a timeline for those elections, although its officials insist
they are the end goal. Venezuela could reach 5mn b/d of crude production in 10
years if its oil sector receives $150bn of investment, Machado said at CERAWeek.
This would be far above Venezuela's last peak of about 3mn b/d two decades ago,
and current output of about 1mn b/d. Machado's plan for Venezuela's energy
sector includes privatising state-owned PdV — which she says has become a
"bankrupt, criminal organisation" — creating an independent energy regulatory
agency, and offering 25-year production contracts with 20pc royalties and the
ability for investors to book production. But her hopes go beyond the
expectations of the international oil companies sizing up investment prospects.
Chevron was the last US producer still in Venezuela before Maduro's seizure ,
and it has increased its output there since then, chief executive Mike Wirth
said. Venezuelan oil reforms "have moved in the right direction" since the US
intervention, but returning Venezuela to 3mn b/d "will require significant
billions of dollars and time to get there", he said. Shell's initial focus in
Venezuela will be geared towards natural gas that can be monetised through LNG,
chief executive Wael Sawan said. "We could even be in a position to take final
investment decisions on one or two projects before the end of this year, if
afforded the right fiscal and legal frameworks," he said. Once bitten ExxonMobil
initially told the White House Venezuela was still "uninvestable", but it has
since softened its approach. It has a team on the ground assessing what it would
take to rebuild the country's long-neglected oil industry, upstream president
Dan Ammann told CERAWeek. ConocoPhillips maintains the most blunt assessment.
Venezuela needs a "completely rewired" fiscal regime to attract the significant
investment needed, as its revised hydrocarbons law is "woefully inadequate",
chief executive Ryan Lance said. His company's priority is trying to secure the
$12bn in international arbitration awards it is owed over Venezuelan asset
seizures in 2007. And he had a message for the White House as it tries to spur
new investments in Venezuela following its legally contentious intervention.
"Not only do you need physical security, you need contract sanctity and policy
durability, not only on the Venezuelan side but on the US side." Send comments
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