Houston, the US oil capital, is buzzing as industry prepares for Venezuelan oil rush
Matthew Goitia explains his idea in a bar downtown Houston. He wants to build and refurbish marine terminals for Venezuela that will allow crude oil to be blended and exported, and chemical products shipped. Matthew Goitia, a director at Pelorus Terminals, explains his ambitious plan to refurbish and build marine terminals that can blend and export crude and ship chemical products in Venezuela. He also plans to add storage tanks, renovate the docks, and ensure that power is available. This could all take three to ten years.
It's still unclear how to obtain permission from the U.S. Government to carry out any of these activities. It's likely that any move into the country would also need a lot of support from both local officials and PDVSA (the state oil company). But this hasn't stopped early ideas from emerging.
Executives, entrepreneurs, and gamblers in offices throughout the city, the center of the U.S. Oil Industry, are trying to find a way to gain a share of the huge Venezuelan crude oil reserves, estimated to be the largest in the world.
Goitia stated that "the small guys are willing take the risk. Venezuela is the lost World." He has held discussions with two private equity firms and is arranging meetings with other independent wildcatters who are willing to risk their capital in order to drill unproven oil wells. Houston's oil industry is sparked by the prospect of a new oil boom less than a week after the U.S. invasion into Caracas, to capture Venezuelan president Nicolas Maduro. U.S. Donald Trump wants $100 billion to invest in the nation's dilapidated industry. This excitement is spreading to much larger companies. Jeff Miller, CEO of Houston's oil services giant Halliburton, told analysts in a earnings call on Wednesday that his phone "rang off the hook" from Venezuela inquiries. He said that the company left Venezuela in 2020 due to U.S. sanctions. It is now working to secure licenses which would allow it return.
Miller attended a meeting in January at the White House, where he told Trump Halliburton would be "very interested" to return. He also said he lived in Venezuela for 4 years and raised part of his family there. He told investors that "there are opportunities for us sooner than later."
"There's a lot initial excitement. Everyone wants to be on the move," said Francisco Monaldi of Rice University's Baker Institute, Houston. Monaldi stated that the Department of Energy had organized meetings with "wildcatters" including Continental Resources founder Harold Hamm, and Hilcorp Energy's founder Jeff Hildebrand. They also attended Trump's Venezuela roundtable at the White House on January 9. Continental and Hilcorp didn't immediately respond to emails asking for comment on any talks or proposals.
Meetings extend to New York, Denver Ali Moshiri is the former Chevron head for Africa & Latin America, now CEO of Houston's Amos Global Energy. He has been preparing to enter Venezuela for years and has begun early stage talks to raise up to $2 billion. He said he had recently met with potential investors in Houston, New York.
The fact that no one knows the rules of investing in Venezuela and operating there under U.S. oversight has tempered the enthusiasm for a quick entrance. Some companies are looking for more concrete plans from the U.S. to ensure a smooth transition to democracy for Venezuela, which would create a stable political climate for long-term investment.
There are two types of companies. Moshiri explained that some of the companies are cautious and waiting for reforms and a risk-free scenario, while others act as if it's a new 'goldrush'. "Those who are involved with Venezuela long-term are trying to find an intermediate ground." J.P. Hanson is the global head of Houlihan Lokey’s oil and natural gas group. He said that many conversations were taking place about Venezuela, but investors, both public and private, still faced a lot of uncertainty.
He said, "They'll need to know they can protect their assets and have a clear chance to own assets." On the sidelines an industry event held in Houston last Thursday. Venezuela's National Assembly started discussing a reform of its hydrocarbons laws last week. The new model would allow local and foreign companies to run oilfields independently through a contract. These changes, which are still awaiting approval, could represent a first step towards allowing independents and wildcatters to enter Venezuela with contracts that offer greater flexibility than the current joint venture model.
THE DENVER LINK Denver, Colorado is emerging as a hub for Venezuela-related activities after several companies based in Denver participated in the Trump Roundtable. Raisa Energy was one of them, a company that acquires non operated stakes in energy assets with a Venezuelan as CEO. Tallgrass Energy is a midstream firm with pipelines and terminals, and Aspect Holdings.
Alex Cranberg is the chairman of Aspect. He said that American oil companies are ready to start "real work" quickly and could help restore Venezuelan production. "The prize is enormous, but it requires durable contracts and long-term confidence-building," he said in an emailed response to questions from , referring to the potential for development in the country's prolific Orinoco heavy crude belt. He said that there was also potential for wildcat exploration onshore and offshore, because modern technology could unlock the oil and gas reserves not included in current estimates.
We need realistic and reliable contractual and security agreements. Cranberg added, "We need a lot of technical data."
Trump told his executives that they would "deal with us directly", and not Venezuela. However, it's unclear what U.S. agencies will do, or who will handle licenses, approve deals, or when U.S. restrictions on facilitating Venezuelan trade in oil might be lifted.
The current sanctions prevent international banks from working in Venezuela. This is because they are not allowed to do so. Lawyers have stated that many Venezuelan laws need to be changed before companies can invest.
PRESSURE FROM WASHINGTON TO GET MOVING
Trump and Chris Wright, his Energy Secretary, are urging the industry to move forward.
Monaldi said: "They're in a rush because the president has told Wright to hurry up, and Wright is, of course trying to deliver." The U.S.-based oil giant Chevron is the only U.S. producer of energy with a permit to operate in Venezuela. Sources from the company, who asked to remain anonymous, reported that there is a buzz in PDVSA's offices in Caracas as well as its operational sites throughout the country. Since the company announced that it had made progress in the negotiations with the U.S., the mood has rapidly changed. Sources said that some company executives have been rushing to set up meetings with foreign oil executives in order to discuss production, exports and power supply, as well as business opportunities.
Emil Calles Lossada is the CEO of Venergy Global in Caracas, which gathers commercial intelligence to help companies looking to invest. He said that the current sanctions in Venezuela are holding back most companies, and therefore, it is necessary to ease the restrictions as well as make legal reforms.
Goitia, who is based in Houston estimates that the two systems will generate returns of at least 20 percent when they are fully implemented. He expects a significant increase in returns if the larger company is interested in buying them after several years.
In an office nearby, however, a young energy developer seeking investors made a completely different pitch. He offered $70 million per year to revive abandoned wells in the eastern part of Venezuela. He estimated he could turn the $800 million into a windfall.
He is trying to raise money from Texas wildcatters to renovate existing wells in need of an upgrade. He says that the infrastructure should still be adequate, despite its state. He only needs to increase production to 50,000 barrels a day. This could take seven months.
Texas is dreaming big and Venezuela's once mythical El Dorado is back in style. (Reporting from Arathy S. Somasekhar in Houston and Nathan Crooks, with additional reporting provided by Liz Hampton, Marianna Parra and Simon Webb; editing by Anna Driver and Simon Webb)
(source: Reuters)
