Trump to meet oil companies at White House about Venezuela
Oil analysts and executives have been sceptical about a quick revival of Venezuela's oil sector as its degraded infrastructure would require billions of dollars and years to rebuild.
Crude oil drips from a valve at an oil well operated by Venezuela's state oil company PDVSA, in the oil-rich Orinoco belt, near Morichal in the state of Monagas on Apr 16, 2015. (File photo: Reuters/Carlos Garcia Rawlins)
WASHINGTON: United States President Donald Trump will meet with oil company executives at the White House late this week to discuss ways to revive Venezuela's tattered oil sector, according to three sources familiar with the matter.
Two of the sources told Reuters the meeting was likely to happen on Friday (Jan 9). It was not immediately clear who would attend.
The White House did not have an immediate comment on the matter.
Raising crude output from Venezuela, which sits on the world's largest oil reserves, is a top objective for Trump after US forces seized the country's leader, Nicolas Maduro, in a raid on its capital Caracas on Saturday.
Venezuela's exports have fallen below 1 million barrels per day from more than 3 million barrels per day two decades ago amid a prolonged lack of investment that has left its infrastructure in shambles.
Administration officials have dismissed estimates by analysts and industry executives that it would take years to ramp up Venezuela's crude production, saying there were ways to quickly boost the country's oil sector with fresh equipment and technology.
Chevron is the only US oil major now operating in Venezuela's oil fields.
Exxon Mobil and ConocoPhillips were major producers in the country before their projects were nationalized by former President Hugo Chavez nearly two decades ago.
The companies have not commented on whether they would be willing to return to Venezuela.
"ENORMOUS" BUSINESS OPPORTUNITY
US Interior Secretary Doug Burgum said one option to boost Venezuelan oil output in the near term was for Washington to lift sanctions that had prevented the country from accessing crucial oil field equipment and other technologies to maximise production.
"Some of these things could be done very quickly. The opportunity on the business side here is really enormous," he told Fox Business Network in an interview.
Trump has said the US industry could expand operations in Venezuela in less than 18 months, possibly with the help of subsidies.
"A tremendous amount of money will have to be spent, and the oil companies will spend it, and then they'll get reimbursed by us or through revenue," Trump told NBC News on Monday.
Trump said on Tuesday in remarks to US House Republicans that increasing Venezuelan production could also reduce energy costs for Americans.
"We got a lot of oil to drill, which is going to bring down oil prices even further," Trump said.
DEGRADED INFRASTRUCTURE, GOVERNANCE
Oil analysts and executives have been sceptical about a quick revival of Venezuela's oil sector, pointing out that its degraded infrastructure would require billions of dollars and years to rebuild.
Renata Segura, Latin America and Caribbean programme director at think tank International Crisis Group, said Trump's timeline of 18 months is overly optimistic and underestimates the scale of challenges.
"The expectation is that it will take at least three years for Venezuela's oil production to (recover),” she said. "(There’s also the) necessity to have a stable government … running the country in a constitutional way."
To do that, Segura said it would require a clear political roadmap to democracy.
“It's clear that Trump has very short-term goals in mind, mainly the removal of Maduro, and obviously oil," she told CNA’s Asia First programme.
“But there needs to be a more long-term, feasible strategy ... plan a transition to democracy through elections … involving negotiations with the current regime (and) also with others outside of it.”
COSTLY DEVELOPMENT
Venezuela's oil reserves are also among the world's costliest to develop because the oil is so thick and heavy that it requires specialised equipment to extract, transport and refine into usable fuels.
With global oil prices relatively low by historical standards, around US$60 a barrel, producers have been focusing on reserves that are cheaper and easier to develop.
"It's hard to imagine increases beyond 300,000 to 400,000 barrels a day in the next year, just given the degraded state of the infrastructure, especially the upgraders," Daan Struyven, co-head of global commodities research at Goldman Sachs, said at the Goldman Sachs Energy, CleanTech and Utilities Conference.
He said it would take until the end of the decade for Venezuela to reach 1.5 million to 2 million barrels per day, and likely only with significant support from the US government.
"I wouldn't rule it out, but it will require time, significant institutional changes," he said.
Energy Secretary Chris Wright is scheduled to speak at the Goldman Sachs conference in Miami on Wednesday morning, while ConocoPhillips CEO Ryan Lance is scheduled to make closed-door comments immediately afterwards.
