Venezuela has
already increased its oil exports, and the wheels are in motion for more
production and export increases. More oil is needed on the world market due to
the disruption in the Middle East, which has taken oil off the market. Hart
Energy’s Velda Addison reports that oil trade between the U.S. and Venezuela
has tripled, and the U.S. continues to supply needed diluent to help produce
and flow Venezuelan heavy oil. New production deals are also taking shape, with
some U.S. majors hoping to recoup lost money and production when the former
government expropriated their invested funds and took over their projects, only
to severely mismanage them.
Tech Times reported last week
from a Houston conference that:
“Dallas-based Hunt Oil Company signed a production
participation contract covering two onshore fields in eastern Venezuela, and
oilfield services giant SLB signed a framework agreement to conduct integrated
reservoir studies across the country.”
It was also reported that
about 500,000 barrels per day of heavy Venezuelan crude are making it to U.S.
refineries. The country’s total output is about 1.25 million barrels per day,
so that is 40% of the country’s total oil. That is up from 1 million barrels
per day in 2025 and is mainly due to Chevron optimizing existing wells rather
than new drilling. In 2025, only about 135,000 barrels per day were delivered
to U.S. refineries. Venezuela’s oil production peaked in the 1970s at about 3.5
million barrels per day.
Hunt Oil’s deal is for
participation in drilling the Caro and Carisito fields in eastern Venezuela.
SLB’s reservoir studies will help evaluate and prioritize oil production
opportunities. Gathering this kind of data, which includes mapping subsurface
geology, determining oil in place and recovery rates, and optimal well
placement, can drive investment decisions or secure project financing. SLB has
80 Venezuelan nationals working in the country, with access to up to 2000
former Venezuelan professionals who left the country. Some of those are willing
to return. According to Tech Times:
“Venezuelan Oil Minister Paula Henao, speaking from
Houston — the geographic heart of American energy — was unambiguous about
Caracas's intentions: "The invitation is that we can sit down, we can
evaluate, what is the opportunity in Venezuela? It's an entire world waiting to
be discovered, just waiting for us to reach these agreements so we can develop
these new areas," Henao told the Houston conference.”
The article goes on to
explain why the country’s heavy oil requires diluent to flow, and naphtha is
the diluent of choice. The naphtha-for-crude supply chain is an important
engineering agreement, rather than a political one, but it works that way too.
The U.S. is currently delivering 100,000 barrels per day of naphtha to the
country for blending.
“Once that blended crude arrives at US Gulf Coast
refineries, it has to be processed using specialized equipment that most
refineries in the world do not have: coking units and visbreakers, which break
down the heavy hydrocarbon chains in extra-heavy crude into lighter, more
useful products. The US Gulf Coast refining complex was built, over decades,
specifically to handle heavy and sour crude grades from Venezuela and elsewhere
in Latin America.”
Thus, the U.S. Gulf Coast
refinery complex is built for sour, heavy oil.
Currently, Venezuela only has
two rigs drilling onshore in the country. More will be needed to sustain and
grow production. SLB is planning to reactivate 15 rigs already in the country.
They predict that four will be in service in 2026 and as many as 15 within a
year. Reactivating drilling rigs that have been idle for years requires
investment and repairs of up to $1 million per rig. SLB and other rig
contractors want contracts for at least one year to justify the costs of
reactivation.
There is some debate about
how fast Venezuela can ramp up its oil production. Predictions range from 3
million barrels per day by 2040 to 3.5 million barrels per day in 5-10 years
(2031-2036).
The U.S. deal with Venezuela
has the goal of increasing oil production with the help of American companies,
with the U.S. controlling and disbursing the revenues. Energy
Secretary Chris Wright has described the arrangement as custodial. The funds
belong to Venezuela but are disbursed with US oversight.
“Oil revenues initially flowed through a US-controlled
account in Qatar; in February, Wright told reporters those proceeds were being
redirected to a US Treasury account held in PDVSA's name, as Haustveit
confirmed publicly. By April, the State Department had authorized approximately
$3 billion in disbursements to Venezuela, though the total revenue generated —
and the gap between generated and disbursed — remained unclear even under
congressional questioning.”
Oil that previously flowed to
China, often via sanctioned shadow fleet tankers, now mainly flows to the U.S,
and Europe via compliant tankers.
Big players like ExxonMobil,
who lost a lot in the 2007 expropriations, are more skeptical of the revival,
citing the mismanaged state of the country’s oil industry. There are up to $170
billion in creditor claims for funds that were expropriated, some of which have
been confirmed by courts as legally refundable. However, it is uncertain
whether or by how much the firms will be refunded.
“Crossover Energy CEO Eric McCrady, who expects to sign
contracts in the coming days, was candid about the calculus: "In the oil
industry you're always managing risks. I think the risks here are more
above-ground — the labor force, equipment availability, the political situation
— versus below-ground geologic risk, well failure risk, things like that. We're
comfortable taking risks." The below-ground risk — the geology — is, as
McCrady implied, essentially zero. Venezuela's reserves are real. The question
is purely what happens above ground.”
The oil reform law, signed at
the end of January by interim President Rodriguez, effectively ends PDVSA’s
monopoly and allows private companies to invest and operate in the country. The
law did not address the legacy claims. Once some mechanism to address those
claims has been agreed upon, the bigger companies will begin investing.
While SLB is planning to
activate in-country rigs, Formentera Partners is planning to import rigs and
equipment into the country. An article in Oilprice.com notes:
“Major obstacles remain. Oilfield companies continue to
face difficulties importing and transporting specialized equipment, while power
supply, infrastructure, permits and contractual protections could constrain
investment.”
Another obstacle to a big
production and export revival has been identified: port infrastructure
integrity. Aging port terminals and frequent power outages are slowing exports,
with some tankers waiting up to thirty days to load. At the country’s peak oil
production decades ago, the ports were able to handle 2.5 million barrels per
day of exports with wait times of less than a week. Again, mismanagement is
implicated.
According to Seeking Alpha:
"The speed of crude transfers from tanks to vessels
is incredibly slow, which forces tankers to occupy docks for longer than their
assigned loading windows," a PDVSA source told Reuters. "And if a
ship arrives to discharge imports, it takes even longer due to lack of fuel
storage capacity."
It has been reported that
Secretary of State Marco Rubio has backed controversial Venezuelan billionaire
Alejandro Betancourt. He has faced years of allegations of money laundering,
tax evasion, and corruption. This also makes me wonder how one could even
become a billionaire in a very poor socialist country. Transparency
International estimated that Betancourt’s company, Derwick Associates,
overbilled Venezuela by $2.9 billion. Derwick disputed the allegations. The U.S
touts Betancourt’s strong understanding of the Venezuelan and the U.S. oil
industries.
According to Newsmax, there
are ongoing disputes regarding who will and will not be allowed to invest in
the country, with the U.S. Treasury Dept. threatening sanctions against certain
companies and individuals.
“The disputes are fueling criticism that Washington may
be replacing one opaque Venezuelan oil system with another — while using
sanctions and political pressure to influence who owns some of the country's
most valuable energy assets.”
“Thor Halvorssen, the Venezuelan-born founder and CEO of
the Human Rights Foundation and a longtime Betancourt critic, delivered one of
the strongest attacks.”
"The Trump administration, at the highest level, is
well aware" of allegations concerning Betancourt's role in Venezuela,
Halvorssen told The Sunday Times.
“He said that if Washington is partnering with him, it
would raise serious questions about "the complete lack of integrity in
America's handling of Venezuela."
References:
SLB
prepares to restart 15 oil rigs in Venezuela. Charles Kennedy. Oilprice.com. August
19, 2026. SLB
prepares to restart 15 oil rigs in Venezuela
US-Venezuela
Oil Trade Surges as Crude Flows Triple, Deals Take Shape. Velda Addison. Hart
Energy. August 19, 2026. US-Venezuela
Crude Oil Flows Triple as Deals Take Shape - Hart Energy
Venezuela
signs first US production contracts while ExxonMobil waits on $170 billion debt.
Devin Culbertson. Tech Times. August 20, 2026. Venezuela
signs first US production contracts while ExxonMobil waits on $170 billion debt
Venezuela
hits roadblock in exporting more oil, as ports can't keep up with demand –
report. Seeking Alpha. August 22, 2026. Venezuela
hits roadblock in exporting more oil, as ports can't keep up with demand -
report
Report:
Controversial Billionaire Brokers Venezuela’s Oil with Rubio Backing. Newsmax.
August 23, 2026. Report:
Controversial Billionaire Brokers Venezuela's Oil With Rubio Backing
No comments:
Post a Comment