On August 28, President Trump announced a deal with Venezuela that secured majority control of more than 65 billion barrels of Venezuela’s proven oil reserves through a partnership with private business—more than double U.S. proven reserves. According to Venezuelan interim President Delcy Rodriguez, the energy agreement with the United States would remain in force for 25 years, target an increase in oil output to 1.5 million barrels per day—an initial goal — and preserve the country’s sovereignty over its natural resources. The deal gives the United States a direct stake in 17 of Venezuela’s oil-and-gas fields, and the broader plan includes developing eight greenfield oil blocks. According to Secretary of State Marco Rubio, the deal would bring nearly $100 billion in private investment, support thousands of high-paying jobs, and help rebuild the country’s economy.
Rodriguez indicated that the agreement could generate about $209 billion in revenue for Venezuela based on an oil price of $65 per barrel. About $19 from each barrel produced and sold under the agreement would go to Venezuela, significantly increasing government revenue. Venezuelan officials are preparing to sign agreements granting new oil exploration and production rights to several companies, including U.S. firms. Chevron is among the companies expected to finalize talks to transition its Venezuelan ventures into the country’s new energy framework.
The 17 fields include green fields in the Orinoco Belt and mature areas in Lake Maracaibo, some of which are currently operated by a small Chinese firm whose contract was signed during Maduro’s administration. In return for giving the United States an ownership stake, Venezuela’s government would benefit from private companies, including American companies, developing the fields and providing more oil revenue.
Current hydrocarbon regulations in Venezuela, which has the world’s largest proven oil reserves at 300 billion barrels, do not include acreage leases for oil areas. For decades, the Venezuelan government has prevented foreign producers from booking the country’s oil reserves. Reformed oil legislation, however, allows oilfield operation through joint ventures and production-sharing contracts. The United States has tried to secure a stable flow of Venezuelan oil for U.S. refineries and has promoted American investment in the country’s oil and gas industry, which currently produces about 1.25 million barrels of oil per day. The deal would more than double U.S. oil reserves by drawing from the world’s largest proven reserves.
According to the Wall Street Journal, the United States and Venezuela are still working out the details, including whether the United States would create joint ventures with private companies or hire companies to work the oil fields. A “lease” is a possibility, with an auction or tender to allocate each field among U.S. producers. A deal would reassure American oil companies, who have not made any big new investments in Venezuela since the United States ousted Maduro in January, to invest in Venezuelan production, and it could potentially lower the cost of oil imports. There have been years of mismanagement during the regimes of Hugo Chávez and Maduro. The Trump administration has played a major role in overseeing Venezuela’s oil industry since ousting Maduro and replacing him with Rodríguez.
The United States needs to replenish its Strategic Petroleum Reserve (SPR), its emergency oil stockpile, and uses crude oil swaps with U.S. producers as payback when it releases oil from the reserve. The SPR currently holds about 290 million barrels in underground salt caverns, about 41% of its total capacity—a 40-year low. Funding shortages and ongoing maintenance at the reserve have limited the Trump administration’s efforts to refill it after President Biden used the reserve to lower gasoline prices before the 2022 midterm elections following Russia’s invasion of Ukraine. The Biden administration did not refill it, and the SPR was at low levels when the war with Iran began in late February. Venezuelan oil may help with the refill because it is a heavy sour oil which works well in U.S. refineries.
Venezuela is considering leaving OPEC as it strengthens ties with the United States, which would free the country from potential quotas and help it maximize long-term oil production. Venezuela joined OPEC as a founding member in 1960, but has not met its OPEC quotas for years because its state-run oil industry was corrupt and its oil infrastructure was badly neglected as the government skimmed money from the enterprise to stay in power.
If Venezuela left OPEC, it would further erode OPEC’s power to affect oil prices. In late April, the UAE announced it would withdraw from OPEC effective May 1 to use its newly expanded production capacity without being limited by OPEC’s production quotas. In June,
Iraq vented its frustrations with OPEC’s output limits, warning that it would consider leaving the organization if denied a higher output level. Angola had previously left OPEC on January 1, 2024, after its quota was cut below its actual production level.
Conclusion
The Trump administration has secured over 65 billion barrels of Venezuelan oil reserves in a 25-year deal, which could ultimately lower the cost of oil imports and help to refill the U.S. emergency oil stockpile depleted to lower oil and gasoline prices during Russia’s invasion of Ukraine in 2022 and later during the conflict with Iran. The deal’s mechanics have not been disclosed. The deal would help encourage American investment in Venezuela’s badly neglected oil infrastructure. Venezuela is also considering leaving OPEC, which would free it from any production quotas by the price-setting cartel.
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