President Donald Trump is pressing U.S. oil companies to revive Venezuela’s energy sector, but executives want “serious guarantees” from the Trump administration before they commit to large investments in the country, the Financial Times reported.
U.S. officials on Wednesday held talks with top oil executives, who are seeking strong legal and financial guarantees before investing in Venezuela, people familiar with the matter told FT.
Trump is scheduled to meet with the executives on Friday, with representatives from Exxon Mobil (XOM), ConocoPhillips (COP) and Chevron (CVX) expected to attend.
Given the risks involved in investing in Venezuela, oil-related stocks that rallied after the U.S. capture of Venezuelan President Nicolas Maduro have already given back much of their gains.
Seeking Alpha readers expected the short-lived rally, according to Monday’s survey that gathered over 1,300 responses, amid concerns over crude supply glut and revenue opportunity in the backdrop of increased capex.
Venezuela has the world’s largest proven oil reserves, accounting for about 17% of global reserves, but contributes to less than 1% of global crude production.
Reviving Venezuela’s oil production would require upgrading its aging pipeline network, new drilling rigs and reliable power supply. Venezuelan oil is also extra heavy and carbon-rich, making it tougher and costlier to extract and refine.
Looking back, Hugo Chávez expropriated most U.S. oil assets in 2007 and drove Exxon Mobil (XOM) and ConocoPhillips (COP) out of Venezuela. The companies have yet to receive compensation for this seizure.
“And so there may be reluctance among foreign companies to invest in the domestic oil industry, given Venezuela’s track record,” ING’s Warren Patterson noted. “We would likely need to see a more appealing and stable environment before the necessary investment emerges.”
The Trump administration told oil executives that they need to return to Venezuela quickly and invest significant capital if they want compensation for the expropriated assets, Reuters reported this week.