WASHINGTON: President Donald Trump said Friday that the United States has secured majority control of more than 65 billion barrels of Venezuela’s proven oil reserves through a partnership with private companies, in a major expansion of Washington’s role in the country’s energy sector.
Trump said the arrangement would allow American companies to help revive Venezuela’s struggling oil industry while increasing crude supplies to US refineries and potentially easing gasoline prices.
The US president provided few details about the agreement, including which oilfields and companies are involved or how Washington would exercise majority control.
Venezuela has the world’s largest proven oil reserves but produces about 1.25 million barrels per day, well below its potential following years of underinvestment, mismanagement and sanctions.
What does the US-Venezuela oil deal involve?
Secretary of State Marco Rubio described the agreement as beneficial to both countries, saying it would provide the United States with stable, low-cost oil while supporting Venezuela’s economic recovery.
Rubio said the arrangement could bring nearly $100 billion in private investment to Venezuela, create thousands of high-paying jobs and help rebuild its economy.
Venezuelan interim leader Delcy Rodriguez said the agreement would support the development of 17 strategic oilfields and could generate $209 billion in tax revenue for the Venezuelan government.
Venezuelan officials are expected to sign agreements next week granting new exploration and production rights to several companies, particularly US firms.
Sources told Reuters that a lease model was under consideration under which oilfields could be auctioned to US producers. However, the arrangement could face legal and constitutional challenges because Venezuela’s state retains control over key parts of the oil industry.
Trump said the US had secured majority control of the reserves but did not explain the legal or financial structure of the arrangement.
Could the agreement face legal and economic obstacles?
Analysts said more information was needed to determine whether the agreement could attract the level of investment projected by US and Venezuelan officials.
David Goldwyn of Goldwyn Global Strategies questioned whether a US government lease of Venezuelan oilfields would have a legal basis under Venezuela’s constitution and hydrocarbons law.
He also said major obstacles, including political uncertainty, inadequate electricity infrastructure and limited export capacity, could continue to discourage investment.
The impact on US gasoline prices is also uncertain. Venezuela produces heavy crude that requires specialised infrastructure for production, transportation and refining, meaning increased output could take years to reach the US market.
The agreement comes as the Trump administration seeks additional Venezuelan crude for US refineries and encourages American investment in the country’s energy sector.
Venezuela nationalised its oil industry in the 1970s, placing state-owned PDVSA at its centre. Under former President Hugo Chavez, foreign oil companies were increasingly required to operate through state-led joint ventures, while some assets were later expropriated.
Venezuelan oil production subsequently declined sharply during the Maduro era amid economic turmoil, sanctions and years of underinvestment.