The privately held US oil producers that were most vocal in their support of President Donald Trump's push to rebuild Venezuela's crippled energy infrastructure at a recent White House meeting may struggle to match their initial enthusiasm with firm action.
While smaller operators, including wildcatters, went to great lengths to tell Trump how quickly they could make inroads and help to revive the South American nation's ailing oil sector — citing their nimble approach and record of working in other high-risk countries — the reality on the ground may be different. Privately held firms were the biggest group represented among the two dozen or so executives summoned to the White House for talks with Trump on the future of Venezuela's oil industry. But they are likely to face the same challenges as their larger peers, which had made their reservations all too clear. Those concerns surround the lack of a legal and commercial framework as well as an unstable security situation following the capture of Venezuelan president Nicolas Maduro.
With the Maduro regime still otherwise largely intact and no change at state-owned oil company PdV, there is "not going to be any change in business practices down there", the University of Houston energy economist Ed Hirs warns. Firms will need assurances about the safety of their workers and equipment before investing. "They need to have a guarantee that they can get their money out," Hirs says. The same obstacles that inform the go-slow approach being taken by some leading US oil companies — most notably major ExxonMobil, which Trump threatened to sideline from his plans following its warning that Venezuela is at present "uninvestible" — could mitigate against any early action.
Fellow major Chevron was the sole US company to offer specific pledges to ramp up production at the meeting, but it has first-mover advantage, having stayed in Venezuela when others left almost 20 years ago. Short-term efforts may be limited to preparations to send in teams to assess current infrastructure.
Risky business
Still, that did not stop independents from assuring Trump they were keen to help bring back Venezuelan oil production, which has slumped by 70pc since the late 1990s. "We are ready to go to Venezuela," Denver-based Armstrong Oil & Gas founder Bill Armstrong said. "It's prime real estate." The firm controls 8mn offshore acres in the Caribbean, adjacent to Venezuela.
Aspect Holdings chairman Alex Cranberg told Trump how his company had been an early mover in Iraqi Kurdistan, despite being warned it was not safe to be there at the time — a bet that had paid off. "Venezuela has a tremendous amount of opportunity," Cranberg said. "What you're doing by putting the US in control of the cash flow coming out of the country is giving companies like ours the confidence to say we can kickstart this production."
Hilcorp founder Jeff Hildebrand also said he was fully committed and ready to go into Venezuela. And Bryan Sheffield, managing partner of private equity firm Formentera Partners, said: "There is a lot of shale there — a lot of upside."
It was left to Harold Hamm, founder of North Dakota-focused Continental Resources and Trump's long-term oil industry confidant, to inject a note of caution. Venezuela "excites me as an explorationist", Hamm told Trump. "It's a very exciting country, a lot of reserves." But he went on to say that there would be challenges involved, although the industry "knows how to handle that".
But until there is clarity around contract sanctity and security, few firms may be willing to actually put boots on the ground. "The devil is in the details and the details have yet to be hammered out," Hirs says.
