Control over Venezuela's oil funds will ensure that its government remains aligned with the US government and international investor interests until fair elections can be held, US energy secretary Chris Wright said today.
"If you're one of the leaders of Venezuela right now, you want to make sure you're on the side with the United States," Wright said at the CERAWeek by S&P Global event in Houston, Texas. "And ultimately, there's going to be an election, so you probably want to show improvement to your citizens."
Wright noted that there is much left to be done and "it's not a Jeffersonian democracy yet, but it's meaningfully better than it was three months ago", when the US on 3 January seized former leader Nicolas Maduro, accused him of widespread election fraud as well as drug trafficking, and moved Maduro's vice president Delcy Rodriguez into power. The US has eased a series of sanctions on Venezuela's oil industry, and obligated market participants to make payments through accounts controlled by the US government.
The US has demanded that Venezuela open its oil and other commodity sectors to investment. There could still be improvements to international arbitration allowances included in reforms to Venezuela's hydrocarbons law it passed since then, and its national assembly is debating similar changes to its mining laws this week.
The law also included "wide bands" of sharing of potential government and private income, "that you can say are discretion for different deals, but can also be avenues of corruption", Wright said, noting that dialogue on this will continue.
Wright said that Venezuela's crude production has increased by 200,000 b/d since the US attack. Venezuela's output stood at 1.028mn b/d in February, compared with 1.16mn b/d in January and 1.12mn b/d in December, based on industry sources consulted by Argus.
Chevron, which was the last US producer still in Venezuela before the seizure, has increased its output in Venezuela since then, chief executive Mike Wirth said today.
He agreed that Venezuela' oil reforms "have moved in the right direction", even if there is more to be done, especially in dispute resolution and possibly narrowing profit ranges in potential deals. Some investment would likely not be profitable on the smaller end of the range, he said.
But as many operators have said, returning Venezuela to its production level of 20 years ago, when output was above 3mn b/d, "will require significant billions of dollars and time to get there", Wirth said.
