Venezuelan opposition leader María Corina Machado is backing a long-term U.S. role in developing the country’s oil reserves, even as she questions who has the authority to sign the sweeping agreement announced by acting President Delcy Rodríguez.
Machado said Thursday that the scope of the agreement remains unclear, including who is signing it, who will finance it, what guarantees investors would receive and how Venezuelans would benefit.
Those are fairly consequential blanks for a deal covering some 65 billion barrels of Venezuelan crude.
Machado called for a “strong, mutually beneficial partnership” between Venezuela and the United States and promoted a development model built around publicly approved rules and competitive bidding. Her criticism centered on Rodríguez’s authority and the process used to negotiate the agreement.
The Trump administration and Caracas announced the agreement last week. Rodríguez has described a 25-year arrangement involving 17 oilfields and a production target of 1.5 million barrels per day. The full contract has not been released publicly.
Venezuela currently produces roughly 1.25 million bpd despite holding the world’s largest proven crude reserves. Much of that oil is extra-heavy Orinoco crude requiring diluent, upgraded infrastructure and extensive drilling and workovers before production can rise substantially.
Years of underinvestment also left pipelines, power systems and production facilities in poor condition.
Foreign oil companies have another problem to solve before writing large checks. ExxonMobil and ConocoPhillips still hold multibillion-dollar claims stemming from Venezuela’s 2007 nationalizations. ConocoPhillips alone is owed roughly $10 billion to $12 billion.
Venezuela also still owes billions on defaulted bonds and nationalization claims. Any company putting new money into its oil fields will want to know where it stands in that very long line of creditors, and whether a contract signed today will still be worth anything under the next government.
Machado’s position adds another layer. She wants U.S. capital and expertise in Venezuela’s oil industry and is not calling for the agreement to be abandoned. She is arguing that future development should rest on rules capable of surviving a change in government.
For producers considering billions of dollars in Venezuelan fields, that distinction is hardly academic. A 25-year oil project only works if the contract lasts longer than the people who signed it.
By Julianne Geiger for Oilprice.com
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