US forces oil majors to invest heavily in Venezuela to recover their debts
Two people who were familiar with this outreach report that White House and State Department officials told U.S. Oil executives, in recent weeks, they needed to return to Venezuela and invest significant capital to revive the damaged industry in order to receive compensation for assets expropriated two decades ago by Venezuela. Venezuela expropriated assets from international oil companies in the 2000s who refused to grant the state-run PDVSA greater operational control as demanded by the late Venezuelan president Hugo Chavez. U.S. oil giant Chevron was one of the companies that negotiated with PDVSA to form joint ventures, while Exxon Mobil left and filed arbitration. Donald Trump announced?on saturday that American companies are prepared to return and invest billions in Venezuela to revive the oil sector. This was just hours after U.S. troops captured President Nicolas Maduro and forced him to step down.
Officials?have stated that U.S. companies will need to invest their own money to rebuild Venezuela's petroleum industry in recent discussions with U.S. officials. This would be a condition for them to recover debts from the expropriations. Sources said that such an investment would be costly for companies like ConocoPhillips. Conoco has been trying to recover $12 billion in assets from Venezuela during the Chavez era. Exxon Mobil filed arbitration cases in international courts to try and recover $1.65billion. Trump made public references to Venezuelan expropriations last month when he ordered the blockade on sanctioned oil tanks.
Conditions for a Return
The sources stated that the decision of whether or not companies would return to Venezuela depends on the way executives, directors and shareholders assess the risks associated with a renewed investment.
ConocoPhillips monitors developments in Venezuela, and their possible implications for the global energy supply. A company spokesperson wrote in an emailed comment on Saturday that it would be premature to "speculate" on future business or investment activities. When asked on Sunday about the discussions with officials of the administration for this article, the company reiterated its statement.
Exxon didn't immediately answer questions on Sunday.
Politico reported the latest discussions first on Saturday. Even if the companies agree to return, it may be many years before oil production is significantly increased. South America has some of the world's largest oil reserves, but its production?has dropped over the past decade due to mismanagement, lack investment, and U.S. sanction.
Analysts have said that in addition to the uncertainty regarding the contract framework for any operations, companies considering a comeback would need to address security concerns, a poor infrastructure, and questions about the legality the U.S. capture of Maduro?as well as the possibility of long term political instability.
Venezuela, a founding OPEC member, produced 3.5 million barrels of oil per day during the 1970s. This represented at that time over 7% global output. In the 2010s, production fell below 2,000,000 bpd and last year averaged at around 1.1,000,000 bpd or only 1% of world production. Nathan Crooks wrote the article. Jarrett Renshaw reported. Simon Webb, Chizu Nomiyama and Simon Webb edited the article.
(source: Reuters)
