US oil companies juggle Venezuelan opportunity and investor concerns ahead of White House Summit
U.S. Oil executives will weigh the business potential of Venezuela and the enthusiasm expressed by President Donald Trump against the cautious attitude expressed by their investors when they are summoned to meet at the White House this Friday to discuss possible investment plans. Speaking at the Goldman Sachs Energy?conference held in Miami, Secretary of energy Chris Wright repeated Trump's claim that U.S. firms are prepared to invest billions of dollars into rebuilding?the South American country?s oil economy?after U.S. troops removed Nicolas Maduro?from power?on Saturday.
Some energy investors, however, were sceptical and questioned whether such expenditures in Venezuela would be cost-effective, as it holds the largest estimated crude oil reserves. The investors also expressed concerns over the political stability of the country and the ability to trust Delcy Rodrguez, the interim government running in Caracas.
Investors will be looking for long-term stability and favorable fiscal terms in order to avoid the risks of asset nationalization that we have seen in Venezuela before, said David Byrns. He is the portfolio manager and senior analyst at American Century Investments.
Attendees of private meetings between Chevron and ConocoPhillips held at the Miami conference said that executives from these companies gave little insight into Venezuela but made it clear they didn't intend to make rash decision.
Chevron and Conoco didn't immediately respond to comments. Trump will urge oil executives on Friday to help boost Venezuelan crude production. Wright, Secretary of state Marco Rubio and Interior Secretary Doug Burgum are expected to attend the meeting. ConocoPhillips will be represented by Exxon and Chevron along with Spain's Repsol, trading firms Vitol, and Trafigura.
Chevron is already operating in the country. Exxon, however, left nearly 20 years ago when their assets were nationalized. They are still owed millions of dollars. Geoffrey Pyatt is a former assistant secretary of state for energy resources in the Biden administration. He said that the tension was between the geological resource, the obvious business opportunities, and the above-ground risks, uncertainties, and unpaid claims. Two sources said on Thursday that foreign embassies in Venezuela have begun to plan visits next week, which will include representatives from American and European oil firms. Matthew Sallee is the head of investments for Tortoise Capital which owns Chevron shares. He said that he would support more Venezuela investments as long as Chevron showed returns. However, he was cautious due to the deterioration of infrastructure.
He said: "If Chevron announced that it would dedicate multi-billions of dollars per year to Venezuela, then we might sell."
Service companies have attempted to dampen any enthusiasm for a rush to Venezuela, as the infrastructure is rebuilt. "We have a facility in Colombia across the border that can deliver rigs to the region. We understand the requirements to work in the area, but we must make sure the timing is correct and that we are able to establish the right customer-partner relationships before we go in," Helmerich & Payne president Trey Adams said at the Miami conference.
Questions about political instability still loom Ali Moshiri is the former Chevron president for?Africa and Latin America. He is now CEO of Amos Global Energy. His firm plans to enter Venezuela. It's in early-stage discussions with U.S. departments of government to secure public funding. They are also working with service companies that will?repair and build pipelines. He added that despite the overwhelming interest of investors, the plan will be dependent on who manages the transition period for the country in the U.S.
Moshiri stated that "that decision must be taken, it's the precondition for investment." Trump may have said that the U.S. will control Venezuela but how this will play out in reality is unclear. Rubio stated on Wednesday that the U.S. had a three-step strategy for Venezuela. The first step is stabilization. Next, there will be a phase of recovery to ensure U.S. companies can access Venezuela, and then a final transition. Samantha Carl-Yoder is the co-chairwoman of Brownstein Hyatt Farber Schreck's international practice. She said that some U.S. companies might be concerned about being pressured into entering Venezuela quickly, or facing repercussions in the future. Companies may feel that they need to return to Venezuela to obtain certain things in other areas. Will the administration take permits and licenses hostage? Will the administration offer financial incentives for companies to invest? These are the questions I'd ask if I was an integrated oil company," said she.
(source: Reuters)
