American Oil Giant Makes Big New Investment In Venezuela

Chevron announced Wednesday that it will invest more than $7 billion to dramatically expand its oil production in Venezuela, putting one of America’s biggest energy companies behind President Donald Trump’s push to revive the South American nation’s crippled oil industry.

The investment will more than double Chevron’s Venezuelan production over the next five years, with the company aiming to produce approximately 600,000 barrels of oil per day by 2031, up from roughly 280,000 barrels per day currently being produced, according to CNBC. Chevron has been assigned two additional oil fields in Venezuela’s massive Orinoco Belt, which contains much of the country’s vast reserves of extra-heavy crude.

“Our expanded position reflects our confidence in the country’s deep resource potential and its ability to compete for investment within our portfolio for decades,” Chevron CEO Mike Wirth said Wednesday.

The announcement comes less than a week after Trump declared that the United States had reached what he called “THE BIGGEST OIL DEAL IN WORLD HISTORY” with Venezuela, giving American interests majority control over more than 65 billion barrels of the country’s oil reserves. Trump said last Friday that the agreement would “MORE THAN DOUBLE” American oil reserves, increase the nation’s oil supply, and “substantially lower Gas Prices for all Americans, long into the future.”

The administration has partnered with North American Blue Energy Partners to develop 17 Venezuelan oil fields containing the reserves. Venezuela’s interim government has granted the company concessions for the fields for 100 years, while the U.S. Defense Department is set to receive a 35% equity stake.

Chevron’s investment is a major step toward turning that broader agreement into actual production. Chevron is currently the only major U.S. oil company with significant operations in Venezuela. It operates several joint ventures with Venezuela’s state-owned oil company, Petróleos de Venezuela S.A.

The company has maintained a presence in Venezuela for more than a century, dating back to 1923, and remained in the country even after the government nationalized its oil industry in 1976 and later tightened state control under socialist President Hugo Chávez.

Chevron’s willingness to put billions of dollars into the country marks a sharp contrast with some of its former rivals. ExxonMobil and ConocoPhillips left Venezuela in 2007 after Chávez forced foreign oil companies into state-controlled joint ventures and seized the assets of companies that refused. ExxonMobil CEO Darren Woods said in January that Venezuela remained “uninvestable,” even after the raid that captured dictator Nicolás Maduro.

Wirth, however, said Venezuela has become considerably more attractive to investors after the interim government enacted a new hydrocarbons law changing taxes, royalties, and other terms governing oil production.

Those reforms “taken this from not being very competitive within our set of alternatives to something that’s very competitive versus our options around the world,” Wirth told CNBC. “Which is why we’re willing to commit significant capital and grow the way we are.” Venezuela possesses more than 303 billion barrels of proven crude oil reserves, the largest such reserves in the world and more than Saudi Arabia’s approximately 267 billion barrels.

Yet decades of socialist mismanagement, corruption, sanctions, and deteriorating infrastructure have left the country producing only a fraction of what its reserves would suggest. Venezuela currently produces just over one million barrels per day, while Saudi Arabia produces roughly 10 million to 11 million barrels per day and the United States produces nearly 14 million.

Much of Venezuela’s oil infrastructure is badly degraded, meaning the reserves Trump touted cannot simply be turned into new supplies overnight. Analysts estimated that restoring Venezuela’s production capacity to levels seen during the 1990s could require more than a decade and hundreds of billions of dollars in investment.

Trump has repeatedly called for U.S. energy companies to return to Venezuela, arguing that the country’s enormous reserves can strengthen American energy security and eventually put downward pressure on gasoline prices.