Trump’s Venezuela Oil Revival Plan Is a $100 Billion Gamble

Realizing President Donald Trump’s plan for a US-led revival of Venezuela’s beleaguered oil industry could be a years-long and challenging process costing upwards of $100 billion.

Years of corruption, underinvestment, fires and thefts have left the nation’s crude infrastructure in tatters. Rebuilding it enough to lift Venezuela’s output back to its peak levels of the 1970s would require companies to invest about $10 billion per year over the next decade, according to Francisco Monaldi, director of Latin American energy policy at Rice University’s Baker Institute for Public Policy. That’s equivalent to more than a third of what Exxon Mobil Corp. — the largest US oil company — has budgeted this year for capital expenditures around the entire globe. Francisco discusses the many challenges ahead for both Venezuela and the US in the post-Maduro era with Carol Massar and Tim Stenovec on Bloomberg Businessweek Daily.

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. You're listening to Bloomberg
BusinessWeek with Carol Masser and Tim Steneveek on Bloomberg Radio.
US energy goals when it comes to Venezuela, as we mentioned,
realizing President Donald Trump's plan for a US led revival
of Venezuela's beleaguered oil industry could be a year's long goal,

(00:23):
long and challenging process, costing upwards Carol of one hundred
billion dollars.

Speaker 2 (00:28):
Yeah, we want to welcome in a scholar on the
politics and economics of energy and resource policy in Latin America. Specifically,
he is Francisco Manaldi, Fellow in Latin American Energy Policy
and director of the Latin American Energy Program at the
Center for Energy Studies at Rice University's Baker Institute for
Public Policy. He's really so much more. I highly recommend
to google him because when it comes to energy economics,

(00:50):
energy management, this is someone who has consulted governments around
the world, including Venezuela, the US, Saudi Arabia, and bunch
of companies as well, including shap Run An excellent mobile
doctor Minaudi. Great to have you here with Tim and
myself is this about a US oil and energy grab.
First of all, in your view, does it make sense

(01:10):
that the United States wants to make sure that those
energy assets are up and running or do you see
that something else.

Speaker 3 (01:18):
Well, I think it's a combination of things. It's one
of the motivations. I mean, without a doubt, having more
production in the Western hemisphere is something that contributes to
the energy security of the United States and potentially of
the world. And today we have a surplus of oil.

(01:39):
So it's not about the short term as much, just
about the future in which the role that is what
I could play, could be really important to supply the
still increasing oil demand in the world.

Speaker 1 (01:52):
What does that future look like, I mean, help us
take this out one five ten years from now, is
what does the demand curve look like? And how does
Venezuela fit into that.

Speaker 3 (02:03):
Well, you know, if you look at the scenarios like
the recent one by the International Energy Agency or the
Energy Information Administration, basically there is a high probability that
we will not see in the next ten years decline
of oil demand. And in those scenarios we actually face
the potential of oil scarcity by the end of this decade.

(02:26):
And there are very few countries, perhaps Iran other than
Venezuela that can increase significantly production in the next decade.
Venezuela could multiply by four or even five its production
at least that's technically possible. Politically is of course another question. Well,
and I.

Speaker 2 (02:45):
Also do wonder some of this because of AI. We
constantly talk about the power grab, the energy draw down,
the energy demand versus supply, because of all of the
investments in AI. Part of it, and this is the
national security play if you will buy the United States.

Speaker 3 (03:06):
Well, the case of AI is more about natural gas
than it is about oil, because oil is typically not
used to produce electricity. But without of that, the fact
that for the first time in a long time we
will see a significant increase in electricity demand in the
United States will have effects over the whole energy system

(03:28):
and does contribute to the need of more fossil fuels.

Speaker 1 (03:32):
So I'm wondering about companies and making big investments in
Venezuela moving forward. Our reporting at Bloomberg News says that
Conico Phillips owned more than eight billion dollars by Venezuela.
Exon is still out about a billion dollars stemming from
the nationalization of assets. International arbitrators have ruled what do
these companies need to see from Venezuelan leadership or from

(03:55):
US leadership to say I'm ready to go back in
there and make significant tens of billions of dollar investments.

Speaker 3 (04:03):
Yes, there are lots of preconditions for them to be
willing to do that. In the case of Kanunco, because
of the size of what they're it is likely that
they will be interested in going back to the country
because otherwise it would be hard for them to recover
that debt. But they will need first of all, they
don't at this point have even contracts. They don't have

(04:25):
you know, any particular films that those films were expropriated
from them, and they will need to have a clear regulatory, contractual,
fiscal framework that is credible in the long run. And
it does make sense for them to you know, sink
billions of dollars in investment before they can recover. In

(04:49):
the case of Action, it might be something they will
be even more cautious because they are not of that
much money, and of course they have a history of
government renegging and difficulty operating in the country that they
will not forget how much.

Speaker 2 (05:06):
Of this also has to do with China, who has
certainly been investing in South America for some time, and
we know that and has a relationship with Venezuela as well.
How much of it has to.

Speaker 3 (05:16):
Do with that, Well, you know, it's interesting the remaining
big players in Venezuela. About half of the production is
done by the national company, twenty five percent by Chevron,
and then the other two big players are the Chinese
and the Russian national companies. Each produces about ten eleven
percent of Venezuela's oil production. In the case of the Chinese,

(05:38):
they have been very hesitant in the last decade or
so to invest more because they have had a tough
experience in Venezuela. They are still out of wards of
ten billion dollars. And in the case of the Russians,
they have a lot of reserves in Venezuela under their contracts,
but they have not developed them, and of course, under

(06:01):
the current circumstances, are very unlikely to develop it in
the future.

Speaker 1 (06:05):
Francisco, I want to ask you, it's a charged question
and it's not a simple one to answer. We have
a couple of minutes left. Here was this a good
idea by the United States, and what you're seeing play
out now, was it a good idea for the oil industry,
a good idea for national security?

Speaker 3 (06:21):
Well, it depends a lot on of course, on what
happens from now moving forward. I mean, if this has
a happy ending with you know, a transition to democracy,
rule of law, et cetera, I think it would be
something very positive for the region and for the future

(06:43):
of the of the oil market. If it doesn't, of course,
it could go really really wrong, and of course we'll
have to see.

Speaker 2 (06:52):
I can leave it there. I'm sure we'll be reaching
out to you again. Doctor Francisco and all the fellow
and Latin American Energy policy directed the Latin American Energy
Program at the Center for Energy Studies over at Rice
University's Baker Institute for Public Policy.