US President Donald Trump’s idea to take control of Venezuela’s oil industry and call on US companies to rebuild after the capture of President Nicolás Maduro is unlikely to affect global oil prices in the near term, analysts say.According to the AP news agency, Venezuela’s oil sector has been hollowed out by years of neglect, mismanagement and sanctions, meaning any significant increase in production would require time and heavy investment.
Although damage from recent U.S. military actions appears to be limited, analysts warn that the country’s oil infrastructure has been deteriorating for years. “It has been derelict for many, many years and it will take time to rebuild,” said Patrick De Haan, senior petroleum analyst at GasBuddy, according to the AP. Current production is around 1.1 million barrels per day, well below historical levels. However, some experts believe production could eventually double or even triple if conditions improve.A key hurdle is political stability. American oil companies are unlikely to commit billions of dollars unless it is clear who governs Venezuela and whether contracts are being honored. Uncertainty remains after Trump claimed that the United States was now in charge, while Venezuela’s vice president argued that Maduro should be returned to power before the country’s top court appointed her interim leader.If the US manages to quickly gain control, optimism could rise. Phil Flynn, senior market analyst at Price Futures Group, said if Washington appears to rule the country for even a short time, U.S. energy companies could be encouraged to step in and restart production, according to AP.Over time, a stronger Venezuelan oil sector could help keep global prices lower and increase pressure on Russia, he added.Oil markets were closed over the weekend and analysts do not expect any sharp price moves when trading resumes. Venezuela’s production is already included in OPEC production and the global market is currently well supplied, limiting the immediate impact.According to U.S. energy data cited by AP, Venezuela has the world’s largest proven crude oil reserves, estimated at about 303 billion barrels, about 17 percent of global reserves. This scale explains why international oil companies remain interested. Chevron is currently the only U.S. company with significant operations in the country, producing about 250,000 barrels per day through joint ventures with state-owned PDVSA. ExxonMobil and ConocoPhillips withdrew from Venezuela in 2007 after then-President Hugo Chávez nationalized much of the sector.Chevron said it remained focused on employee safety and compliance with laws, while ConocoPhillips said it was monitoring developments but would not speculate on future investments, AP reported.Experts emphasize that the challenge is less about finding oil and more about trust and stability. “How do you get foreign companies to invest money before they have a clear idea of the political stability, the contractual situation and the like,” asked Francisco Monaldi of Rice University.Even with huge reserves, Venezuela produces less than 1 percent of global supply. Corruption, sanctions and underinvestment caused production to fall from 3.5 million barrels per day in 1999 to current levels. Reaching four million barrels per day could take about a decade and require about $100 billion in investments, Monaldi said.Venezuela’s heavy crude oil is particularly valuable for the production of diesel and asphalt, fuels that are in short supply worldwide.According to the AFP news agency, US refineries along the Gulf Coast are well suited to processing this type of oil, making access to Venezuelan crude attractive.
