(The Hill) — The Trump administration’s plans for Venezuelan oil are beginning to take shape, including a U.S. takeover of the fuel produced there and something of a step back from the initial push to swiftly involve U.S. producers.
Immediately after the capture of Venezuelan leader Nicolás Maduro, President Donald Trump indicated that U.S. firms would be involved in pumping the country’s vast oil reserves.
“We’re going to have our very large United States oil companies, the biggest anywhere in the world, go in, spend billions of dollars, fix the badly broken infrastructure, the oil infrastructure, and start making money for the country,” Trump said over the weekend.
He later told reporters on Air Force One that he spoke with oil firms before and after Maduro’s capture and “they want to go in so badly.”
And he told NBC News that expanded U.S. oil operations could be “up and running” within 18 months.
However, as described by Energy Secretary Chris Wright, the plans don’t necessarily appear to involve U.S. firms going into the country right away, even as the administration proposes to control Venezuelan oil “indefinitely.”
“Indefinitely, going forward, we will sell the production that comes out of Venezuela into the marketplace,” Wright said at a Goldman Sachs energy conference in Miami.
“We will have [the] U.S. as the supplier of diluent. It’s got to get down there to enable that production,” he said, referring to materials that can be used to dilute heavy crude oil like that which comes from Venezuela.
“We’re going to have that flowing again and as we make progress with the government, we’ll enable the importing of parts and equipment and services to kind of prevent the industry from collapsing, stabilize the production, and then as quickly as possible, start to see it growing again and of course, in the long run, create the conditions that the major American companies that were there before — or maybe that weren’t there before, but want to be there — will go in,” Wright said Wednesday.
Robert Weiner, a professor of international business at George Washington University, said the U.S. government can sell oil produced in Venezuela by “marketing the oil through traders.”
He said it’s possible that state company Petróleos de Venezuela “could work with the US government.”
In a fact sheet issued Wednesday, the Energy Department said that it had already begun marketing Venezuelan oil and was working with “the world’s leading commodity marketers and key banks to execute and provide financial support for these crude oil and crude products sales.”
“Having the government play the role of you, like a middleman or middle woman, in selling the oil …could work for everybody. The key question is, what happens to the money after the oil is sold,” Weiner added. “The oil is owned by the people of Venezuela, and when oil is sold, the money belongs to them.”
The Energy Department, in its fact sheet, said that proceeds from the sales will “first settle in U.S. controlled accounts at globally recognized banks” and will later “be disbursed for the benefit of the American people and the Venezuelan people at the discretion of the U.S. government.”
It did not provide additional details on how the money would be dispersed. It did note that the U.S. would try to improve Venezuela’s electric grid.
Prior to the U.S. attack on Venezuela over the weekend, one American firm, Chevron, was already there.
The company hasn’t said whether it plans to expand operations amid the upheaval, instead saying it “remains focused on the safety and wellbeing of our employees, as well as the integrity of our assets.”
But on Thursday, Wright predicted it could ramp up its Venezuela operations “quickly.”
“You’re going to see probably a growth in Chevron activities there quickly,” he told Fox Business.
However, Wright indicated that the role of other U.S. firms could be more limited.
“You’re going to see [ConocoPhillips] and Exxon and dozens of other American firms immediately looking at, ‘Hey, what constructive role can we play? How can we be a little bit of help for existing operations? Maybe we can get to a framework where we’ll go in, in a large way again.’ But in the meantime, they’re not going to sit on their hands. They’re going to work to look at what’s going on in the industry, and what productive advice and help can they give on that,” he said.
ExxonMobil and ConocoPhillips had operations in Venezuela but left the country in 2007. It’s not clear whether they will seek to go back in. A spokesperson for ConocoPhilips said earlier this week that it would be “premature to speculate on any future business activities or investments.”
Weiner said that he does not expect U.S. companies to go into Venezuela amid the current turmoil in the nation.
“It’s just too risky. They’re not going to go to a country with no rule of law, no clear government, no clear contracts,” he said.
“They’re going to likely to ask the U.S. government to provide some kind of guarantee,” Weiner added. “The guarantee would mean, in effect, [if] U.S. companies run into trouble there, the government would be obliged to bail them out with taxpayers’ money.”
Trump floated reimbursements for U.S. companies in his interview with NBC this week.
Claudio Galimberti, chief economist at Rystad Energy, said that in the long term, companies may decide to invest in Venezuela, but he doesn’t expect them to do so immediately.
“Given the size of the reserves, I expect that Venezuela will eventually be a very important investment for many companies, but not right now, because the situation is very compromised,” he said.
He added he does not expect the U.S. actions to have significant short-term impacts on global oil markets, but it could make a difference in the long term.
“When you’re talking about the oil industry, things are measured in terms of years, not in terms of days,” Galimberti said, adding that it could take until the end of the decade to double the country’s oil production.
Meanwhile, the White House is expected to meet with oil firms at the White House on Friday.
“We have a meeting tomorrow in the White House with a bunch of companies,” Wright told Fox.
“The biggest problem with that meeting is so many people disappointed that I didn’t invite them to come as well. There is tremendous American interest to see, ‘How can we help the United States government? How can we help solve the problem in Venezuela?’” he said.