Trump's Venezuela Oil Plan Faces Steep Climb

Donald Trump has outlined an ambitious vision to unlock Venezuela's vast oil reserves, declaring his intention for American firms to oversee the nation's transition and channel significant investment into its energy sector. With Venezuela boasting the world's largest proven crude oil reserves, the prospect sounds enticing. But experts are quick to offer a stark reality check: this plan faces formidable obstacles, demanding billions and potentially a decade to yield substantial results. Venezuela sits atop an estimated 303 billion barrels of oil, yet its current production tells a different story. Output has plummeted to a mere third of what it was a decade ago, now accounting for less than 1% of global consumption. This dramatic decline began in the early 2000s as successive governments asserted greater state control over the national oil company, PDVSA, leading to a departure of skilled personnel. Adding to the woes, US sanctions, initially imposed in 2015 over alleged human rights violations, have severely restricted a vital revenue stream for the Maduro administration. These measures have also cut off the country from crucial investment and essential parts needed to maintain its infrastructure. According to Callum Macpherson from Investec, the nation's infrastructure is the "real challenge." Bill Farren Price of the Oxford Institute for Energy Studies notes that much of the complex supply chain has been "dismantled and sold off." Beyond the dilapidated infrastructure, there are significant practical and political hurdles. Venezuela's oil is predominantly "heavy, sour" – a type that is more challenging to process than the "light, sweet" oil typically produced by the US. More critically, Homayoun Falakshahi, a senior commodity analyst at Kpler, highlights that any company hoping to invest would first need an agreement with a stable Venezuelan government, which is currently non-existent. Analysts like Neil Shearing from Capital Economics suggest that even if Trump's plans materialise, the impact on global oil supply and pricing would be minimal by 2026 due to the long timelines involved. Firms would need to risk substantial capital on a potentially unstable political landscape, with projects only delivering returns many years down the line. Even a return to Venezuela's peak production of three million barrels per day wouldn't place it among the world's top ten producers, and the global market is currently well-supplied. Lord Browne, former BP chief executive, describes the revival of Venezuela's oil industry as a "very long term project," warning that initial output might even fall during restructuring. While Chevron is the only American oil producer still active in the country, other major firms have remained publicly quiet. Yet, the sheer scale of the opportunity could prove irresistible, despite past negative experiences where companies like ExxonMobil and ConocoPhilips are still seeking billions in compensation for nationalised assets. Ultimately, while the promise of Venezuela's vast reserves is clear, the path to unlocking them is fraught with immense practical, financial, and political complexities, suggesting a far longer and more arduous journey than a quick fix. --- Managing your business finances? TaxAce provides smart online accountancy services for UK businesses with flexible monthly plans. Image and reporting: https://www.bbc.co.uk | Read original article