The Trump Venezuela oil deal has been condemned as an act of colonial cronyism by energy analysts, who warn it could take years to deliver meaningful results and may not survive a change of government in either country.
President Donald Trump announced the agreement at the weekend, calling it the ‘biggest oil deal in world history.’ Under the plan, the US would take control of more than 65 billion barrels of proven oil reserves across 17 Venezuelan oilfields, with the Department of Defense holding a 55% stake in production.
According to Fox Business, the US will also have the right to purchase 20% of the oil produced from all current and future fields operated by North American Blue Energy Partners (NABEP), the second-largest private Venezuelan oil producer, at the cost of production.
Colonial comparisons over Trump Venezuela oil deal
‘If the US scheme in Venezuela sounds colonial, that’s because it is,’ said Gregory Brew, senior energy analyst at the Eurasia Group. ‘This is the Trump administration trying to increase US revenue from Venezuelan oil production. It’s extremely unusual. It’s probably unprecedented in the history of the international oil industry.’
Brew said the closest comparison is the era when the UK owned a majority of BP, then known as the Anglo-Persian Oil Company, and developed oil resources in Iran and Iraq, more than 50 years ago.
The deal is structured through NABEP, controlled by Venezuelan businessman Alejandro Betancourt López and his family. BBC News reports that Betancourt López was born in February 1980 in Caracas. His bank accounts have been under investigation in Switzerland for years, though he has not been formally charged with any crimes.
‘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.’
Interim Venezuelan President Delcy Rodriguez said the deal would involve an investment of more than $100 billion and generate more than $209 billion in tax revenues for Venezuela, though the source of the funds remains unclear.
SPR plan faces practical obstacles
Trump pledged to use Venezuelan oil to replenish the US Strategic Petroleum Reserve (SPR), which has been drained to its lowest point since 1982 at 286 million barrels. The SPR stood at 415 million barrels when the Iran war began and has lost nearly 130 million barrels in five months.
‘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 PPHB. Venezuela’s extra heavy crude grades are incompatible with the underground salt cavern storage facilities in Texas and Louisiana that comprise the reserve.
Wicklund also questioned how the Department of Defense could take an equity stake in a foreign oil company. ‘How the Department of Defense is going to take an equity stake in a foreign oil company is beyond me,’ he said. ‘I don’t see the point or the benefit or how it practically happens.’
Matt Reed, vice president of geopolitical and energy consultancy Foreign Reports, said the deal faces a long road. ‘It may be years before it meaningfully boosts Venezuelan production and it will likely have to survive a change of administration in both countries,’ he said.
Venezuelan production has risen from just under 1 million barrels per day to more than 1.2 million barrels daily, largely through Chevron optimising existing wells rather than bringing in new drilling rigs. The country produced more than 3 million barrels daily at the beginning of this century.
Radhika Bansal, vice president of upstream research at Rystad Energy, said the deal could trigger ‘civil unrest’ in Venezuela given the sensitivity of natural resource control, but added that identifying 17 potential projects was cause for ‘cautious optimism.’ ‘Even if everything goes as planned, it’s going to be a gradual recovery,’ she said.
