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Chevron plans to invest $7bn to more than double its oil production in Venezuela over the next five years, in the first big commitment from a US major in the Latin American country since the Trump administration toppled former leader Nicolás Maduro.
The White House has been pushing international companies to invest in Venezuela as it attempts to increase the supply of US-controlled oil from the country. Energy secretary Chris Wright is visiting Caracas this week to announce commitments by US groups and drum up further investment.
Chevron said on Wednesday that it had agreed new terms for its operations with state oil company PDVSA and that investment plans through its various joint ventures in the country would boost output to 600,000 barrels a day. The Houston-based group added it had secured the rights to develop two new oilfields in the Carabobo region within the oil-rich Orinoco belt.
Mike Wirth, Chevron’s chief executive, said the decision to expand its business in Venezuela “reflects our confidence in the country’s deep resource potential” and said the country would be a competitive part of its portfolio “for decades”.
Chevron said Venezuelan crude, which can often be heavy and difficult to extract and transport, would incur total costs of less than $20 a barrel. Its new acreage sits adjacent to existing joint venture holdings.
The company was among those to maintain its operations in Venezuela despite US sanctions and was seen by Washington as a block against Russia and China’s growing control in the country’s oil sector.
US majors ExxonMobil and ConocoPhillips have thus far been reluctant to make a move into Venezuela after losing billions of dollars’ worth of assets in state expropriations.
Italy’s Eni and Spain’s Repsol also kept operating in the country under US sanctions. Eni has said it could raise oil output from 12,000 b/d to 200,000 b/d or more but has not confirmed an investment plan.
The Trump administration this week defended its separate venture to boost Venezuela’s oil sector. Alejandro Betancourt, who owns the second-largest private oil company in Venezuela and is a polarising figure in the country, is the US’s partner in a group that will control about one-fifth of the Latin American nation’s oil reserves.
Betancourt’s company has begun looking for potential investors in the 17 oilfields it has access to with the goal of attracting $100bn in investment to the country. The Chevron deal is not linked to those efforts.
Chevron’s current production in the country is 280,000 barrels a day, up from 50,000 barrels a few years ago, analysts at RBC Capital said in a note this week after a meeting with the company’s chief financial officer Eimear Bonner.
Bonner said that “fiscal protections” like international arbitration rights would be needed for Chevron to invest more in Venezuela, the analysts added.
BP and Shell have both announced new projects in Venezuela this year, with most of their new investments focused on offshore gasfields.
