Donald Trump’s plans to take over Venezuela’s oil industry could have a negative impact on U.S. oil companies, executives from the shale patch have warned, per a Financial Times report that cited several of them.
The problem that executives see with the Venezuelan takeover plan is that it would drive oil prices lower, and many shale drillers cannot afford much lower prices.
“We’re talking about this administration screwing us over again,” one unnamed industry executive told the Financial Times, adding that Trump’s Venezuelan plans were “against American producers”. “If the US government starts providing guarantees to oil companies to produce or grow oil production in Venezuela I’m going to be . . . pissed,” the blunt executive added.
Indeed, Trump has already suggested there will be some form of financial guarantees for U.S. oil majors willing to go to Venezuela. Earlier this week, the president said that U.S. companies could be “up and running” in Venezuela within 18 months. “A tremendous amount of money will have to be spent, and the oil companies will spend it, and then they’ll get reimbursed by us or through revenue,” Trump also said.
“To me, the signal from the administration is: we’d rather spend our American money on propping up a Venezuelan oil business than supporting our current independent businesses,” the chief executive of Latigo Petroleum told the Financial Times.
Indeed, only Big Oil supermajors can afford the investment necessary to revitalize Venezuela’s oil industry—which is why Trump is meeting with their executives later today to discuss just that. It is also Big Oil supermajors that are best placed to withstand lower oil prices—something that smaller field operators in the U.S. shale patch cannot afford.
“I think it’s an appropriate reaction by US shale to be miffed,” Dan Pickering from Pickering Energy Partners told the FT. “Not just because Venezuelan production might go up but because the US government, in theory, is going to subsidise that.”
By Irina Slav for Oilprice.com
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