President Trump’s plan for the U.S. to own majority control of Venezuelan oilfields harkens back to a century-old era of colonialism and backroom dealmaking with Venezuelan oilmen and politicians, energy and geopolitical analysts said.
While a revitalization of Venezuela’s dilapidated oil industry may be heading in the right direction, the process will require huge infusions of new investment. It will occur on a timeline that extends far beyond the administrations of Trump and interim Venezuela President Delcy Rodriguez—meaning any success will take years to come to fruition.
“If the U.S. scheme in Venezuela sounds colonial, that’s because it is,” said Gregory Brew, senior energy analyst with the Eurasia Group. “This is the Trump administration trying to increase U.S. revenue from Venezuelan oil production. It’s extremely unusual. It’s probably unprecedented in the history of the international oil industry.”
The closest comparison, he said, is over 50 years ago when the U.K. owned a majority of BP (previously the Anglo-Persian Oil Company) and developed oil resources in Iran and Iraq.
Trump announced the deal over the weekend, calling it the “biggest oil deal in world history.” The U.S. would control more than 65 billion barrels of proven oil reserves in 17 oilfields in Venezuela.
Although most of the details remain unknown publicly, the agreement would operate through the second-largest, private Venezuelan oil producer, North American Blue Energy Partners (NABEP). The U.S. Department of Defense would own a 55% stake in the oil production. Chevron, which never left Venezuela after the expropriation of oil assets that caused other U.S. companies to flee almost 20 years ago, is the top private producer.
“The deal more than doubles American oil reserves, dramatically increases domestic supply, and is projected to substantially lower gas prices for all Americans long into the future,” the White House said in a statement.
The White House and NABEP did not respond to requests for interviews and additional comment.
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Vague on details
NABEP is controlled by the Venezuelan businessman Alejandro Betancourt López and his family. López’s bank accounts have been under investigation in Switzerland for years, but he has not been formally charged with any crimes. López also has fostered close relationships with both the Trump and Rodriguez administrations.
“On one hand, this individual seems to be in a good position to facilitate this kind of deal,” Brew told Fortune. “But, from a certain angle, this looks like an insider deal to profit businessmen who are close to Delcy and who are also close to Trump and his inner circle.”
In a statement, Rodriguez said the deal would involve an investment of more than $100 billion—although it’s unclear where the funds would come from—and generate more than $209 billion in tax revenues for Venezuela.
Regardless, the deal promises to be a “political lightning rod” in Washington and Caracas since it pertains to Venezuela giving up a large stake of its natural resources to a country that forcibly removed its former leader, Nicolás Maduro, at the beginning of the year, said Matt Reed, vice president of geopolitical and energy consultancy Foreign Reports.
“It may be years before it meaningfully boosts Venezuelan production and it will likely have to survive a change of administration in both countries,” Reed said.
“I’m more curious to see whether Venezuela can attract top-tier U.S. companies, besides Chevron, which benefits from a longstanding relationship there,” Reed added. “U.S. firms have the capital and technology Venezuela needs to reach its potential, but they also have reservations given the history and current circumstances. Those companies don’t need sweetheart deals or financial aid from the Pentagon; they just need certainty.”
Some small U.S. producers, such as Hunt Oil, are investing in Venezuela, but the other biggest players, such as ExxonMobil and ConocoPhillips, have remained reluctant, although they’re investigating the possibilities.
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Strategic reserves
Venezuelan oil production has risen this year from just under 1 million barrels per day to more than 1.2 million barrels daily, an increase of almost 250,000 barrels each day. Largely led by Chevron, that increase has come primarily by optimizing existing oil wells, and not by bringing in new drilling rigs and teams.
Venezuela’s oil industry last churned out more than 3 million barrels daily at the beginning of this century and was still above 2 million barrels a day a decade ago.
Trump quickly pledged to use Venezuelan oil to replenish the U.S. Strategic Petroleum Reserve, which was just depleted to 44-year lows amid the ongoing war in Iran.
“One of the things I am going to do with the Venezuelan oil is fill up the [SPR] which, because of Sleepy Joe Biden, has been virtually emptied,” Trump said on social media.
But using Venezuelan oil to fill the SPR is a virtual impossibility, experts said. That’s because the extra heavy grades of Venezuelan crude oil are incompatible with the underground salt caverns storage facilities in Texas and Louisiana that comprise the SPR.
“We don’t put heavy sour crude into the SPR. So the idea of refilling the SPR from Venezuela doesn’t work,” said Jim Wicklund, a veteran oil analyst and managing director at the PPHB energy investment firm.
The SPR is now drained down to 286 million barrels, which is its lowest point since 1982 when it was still being filled up during its infancy. The SPR was at 415 million barrels when the Iran war began, having been depleted of nearly 130 million barrels in five months.
Falling below 300 million barrels already makes the salt caverns less structurally sound, but falling below 252.4 million barrels would trigger a federal law that only allows additional drawdowns under severe national security declarations.
To Trump’s point about President Biden though, the SPR was at 638 million barrels when Biden took office in 2021 and was depleted heavily in the aftermath of Russia’s invasion of Ukraine when oil prices spiked.
As for the broader deal in Venezuela, Wicklund said he doesn’t see how it accomplishes anything more than potentially giving U.S. companies “a more secure feeling” their assets wouldn’t be expropriated again if the U.S. government is directly invested.
“How the Department of Defense is going to take an equity stake in a foreign oil company is beyond me,” Wicklund said. “I don’t see the point or the benefit or how it practically happens.”
Radhika Bansal, vice president of upstream research for Rystad Energy, said the deal could trigger more “civil unrest” in Venezuela because control of the country’s natural resources is a “very, very sensitive topic” for politicians and the public alike. That said, the fact that the governments have already identified 17 potential projects shows that the oil industry is “moving in the right direction” and could be cause for “cautious optimism.”
But that doesn’t mean this deal will help fill the SPR or lower prices at the pump.
“Even if everything goes as planned, it’s going to be a gradual recovery,” Bansal said.
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