President Donald Trump's deal giving the U.S. majority control over Venezuelan oil reserves won't lower American gas prices anytime soon, energy analysts say. Venezuela's oil infrastructure needs years and tens of billions of dollars in investment before output can rise meaningfully, even as Exxon, Chevron and other majors move to expand their presence in the country.
Drivers in the U.S. won't see cheaper gas from Trump's oil deal with Venezuela because it will take years to significantly lift the country's production, experts told CNBC. Trump secured majority U.S. control over 65 billion barrels of Venezuela's proven reserves, roughly a fifth of the 303 billion barrels the country is thought to hold.
Gas prices already near a record
U.S. gas prices averaged $4.08 a gallon nationwide on Monday, nearly 30% higher than a year earlier. Patrick De Haan, head of petroleum analysis at GasBuddy, said prices will almost certainly set a new all-time Labor Day high, topping the previous record of $3.83 a gallon set in 2012. Trump promised the deal would substantially lower gas prices for Americans, but analysts say that relief won't arrive soon.
Venezuela's output far below its peak
Venezuela is currently pumping around 1.2 million barrels a day, down from a peak of 3.5 million barrels a day in the late 1990s after years of mismanagement under the country's socialist government. Rystad Energy estimated that restoring peak output would take about $180 billion of investment through 2040. Secretary of State Marco Rubio said the deal will instead bring nearly $100 billion of private-sector investment to the country.
Exxon and Chevron weigh a return
Chevron, already active in Venezuela through joint ventures with state-owned PDVSA, has lifted its production 15% to 280,000 barrels a day this year and expects up to 50% further growth through 2028. Trump said Monday that Exxon is also entering Venezuela, alongside Chevron and other major U.S. oil companies, a stunning reversal for Exxon nearly two decades after it exited Venezuela following the nationalization of its assets. Firms including GE Vernova, India's ONGC, Italy's Eni and Colombia's GeoPark are also on track to announce new or expanded projects in the country. Even so, growth will be constrained by export terminals, where tankers are waiting up to 30 days to load crude cargoes because of aging infrastructure and power outages.
A 25-year deal with unclear terms
Venezuela's interim president, Delcy Rodriguez, said the 25-year deal will develop 17 oil fields and initially lift production to 1.5 million barrels a day. David Goldwyn, a former State Department special envoy for international energy affairs, said fields in the Orinoco Belt have little existing infrastructure and could take five to seven years to deliver higher output. Goldwyn also said the agreement's details remain unclear, according to CNBC: "Nothing has been published, so we're really still operating on Tweets and rumors." Bob McNally, president of Rapidan Energy, said the deal faces significant political risk in Washington and Caracas, since a future government in either could unwind it.
Sources: CNBC, Investing.com
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