Picky Sisters: What Big Oil Thinks About Venezuelan Oil
Last Friday, nearly a week after the Trump administration’s rendition of former Venezuelan President Nicolás Maduro, a group of oil and gas executives met with President Trump and select members of his cabinet to discuss the future of Venezuelan oil development. Corporate attendees included representatives from Chevron, ExxonMobil, ConocoPhillips, Continental Resources, Eni, and Repsol, among others.
What Did Big Oil Tell Trump?
While much discussed by some media, President Trump’s ”go back to Chevron, they want to discuss something” gaffe was not the headline that emerged from the White House meeting. Darren Woods, CEO of ExxonMobil, summed up the future of Venezuelan oil succinctly, calling it “un-investable.” Woods went on to detail the conditions under which his company would consider deploying capital in Venezuela, but his current view, and tone, were clear. Over the weekend, President Trump responded that he would “probably be inclined to keep Exxon out.”
The day prior to the White House meeting, Treasury Secretary Scott Bessent put it bluntly: “The big oil companies who move slowly, who have corporate boards, are not interested.” Whether the Secretary’s comments were a slight, or a veiled nod to corporate governance, is unclear.
“Venezuelan barrels are complex, capital-intensive, and buried beneath layers of operational and geopolitical risk.”
Based on the IEA’s new year report, it’s clear that the global economy is currently oversupplied with oil, and the supermajors have little appetite for high-risk, high-cost barrels. While indeed massive, Venezuela’s reserves are both.
Why Are Supermajors Saying No?
Much of the country’s oil lies in the Orinoco Belt, which stretches from mainland Venezuela to offshore waters, and consists largely of extra-heavy, sour crude deposits. These resources are difficult to extract, process, and transport. That challenge is complicated by the risk premium for operating in a country where corporate assets have previously been nationalized, twice in ExxonMobil’s case, and the opportunity cost of ignoring basins with cleaner economics.
Venezuelan barrels are complex, capital-intensive, and buried, literally and figuratively, beneath layers of operational and geopolitical risk.
How Are Markets Reacting?
Market reaction to Friday’s meeting, and to the prior rendition of Maduro, has been mixed. The sell-off in Canadian oil sands producers, whose heavy oil assets would compete with an increase in Venezuelan barrels for U.S. refining capacity, began following the U.S. military action and is probably overdone. Meanwhile, shares of Chevron, which by all accounts stands to benefit most among U.S. oil and gas companies, from the rehabilitation and development of Venezuelan oil assets, have seesawed. Adding to the noise is Maduro’s (now moot) threat to various supermajors’ interests in oil assets in neighboring Guyana and previously awarded arbitration damages to both ExxonMobil and ConocoPhillips, which remain unrecovered.
For now, investors appear generally neutral on future Venezuelan oil development. That is unsurprising given the Trump administration’s lack of an articulated strategy, or lack thereof. Investors are more interested in a potential disruption to Iran’s 3-4 million barrels; a daily production volume Venezuela might reach only after a decade and hundreds of billions of dollars of investment.
Putting aside Chevron, which maintained its Venezuelan operations since the most recent 2007 nationalization of the oil industry, expect other supermajors to indulge the President by setting up in-country working groups, but also to maintain the capital discipline that has served them relatively well of late. Given Secretary Bessent’s full comments, it’s possible that some independent E&P companies will put capital to work. But ‘big oil’ they are not.
What’s Next for Venezuelan Oil?
For investors in the oil and gas industry, the headline volatility resulting from the Trump administration’s actions in Venezuela presents tactical opportunities. At the same time, and more broadly, the Trump administration’s apparent eagerness to ignore a rules-based order is a reminder to all investors of the importance of portfolio diversification, hedging strategies, and other risk management tools.
David Root
Head of Product Management
