Trump Presses Big Oil to Pour $100 Billion Into Venezuela—Executives Signal Caution

By Jennifer A. Dlouhy (Bloomberg) — Major US oil executives expressed caution to Donald Trump about reentering Venezuela, even as the president pressured their companies to spend at least $100 billion to revive the country’s crude oil production.

Trump convened nearly 20 industry representatives in the East Room of the White House on Friday and predicted they could come to an agreement “today or very shortly thereafter” to restart operations in the oil-rich Latin American country, following the brazen capture of leader Nicolás Maduro.

“If you don’t want to go in, just let me know, because I’ve got 25 people that aren’t here today that are willing to take your place,” Trump told the oil representatives.

Comments from some of the executives indicated the president may need to do more convincing. While many praised Trump and said they relished the opportunity resulting from last weekend’s military action, they stressed that hard work remained before they could make substantive investments.

Exxon Mobil Corp. Chief Executive Officer Darren Woods said that Venezuela is currently “uninvestable.”

“There are a number of legal and commercial frameworks that would have to be established to even understand what kind of returns that we get on the investments,” Woods said, adding his company’s assets had been seized by the government in Caracas twice before. 

“How durable are the protections from a financial standpoint? What will the returns look like? What are the commercial arrangements, the legal frameworks,” Woods asked. “All those things have to be put in place in order to make a decision to understand what your return would be over the next several decades.”

Even Continental Resources Inc.’s Harold Hamm, a longtime Trump donor, sidestepped a question on his personal plans to invest in Venezuelan operations, though he said the prospect “excites me as an explorationist.”

“There’s a huge investment that needs to be done — we’ve all agreed on that, and certainly we need time to see that through,” Hamm said.

Trump, looking to rally support, said the US would provide security guarantees to companies that went into Venezuela, without detailing how that would work. He also predicted that companies would quickly make back investments in new or updated equipment.

“We’re dealing with the country, so we’re empowered to make that deal. And you have total safety, total security,” Trump said. “You’re dealing with us directly, you’re not dealing with Venezuela or we don’t want you to deal with Venezuela.”

But at the same time, Trump said the US would not consider prior losses suffered by companies that had to abandon their Venezuelan operations.

At one point, Trump asked Ryan Lance how much the company had forfeited in Venezuela, prompting the ConocoPhillips CEO to say it had taken a $12 billion loss.

“Good write-off,” Trump joked.

“It’s already been written off,” Lance responded.

Other companies expressed optimism about the opportunities available, with Repsol SA CEO Josu Jon Imaz San Miguel telling Trump his company was “ready to invest more in Venezuela today” following a “commercial and legal framework that could allow this.”

“We are ready to go to Venezuela,” said Bill Armstrong, CEO of Armstrong Oil & Gas. “In real estate terms, it is prime real estate. And it’s kind of like West Palm about 50 years ago: very ripe.”

Still, the overall tenor underscored the difficult road ahead the Trump administration faces in enticing major oil producers back to Venezuela. The US’s military intervention there stunned many Americans, including some of Trump’s own supporters, who called it a naked attempt to seize another country’s natural resources. 

The president has framed it as a chance to oust a leader in Maduro who posed a national security threat and tap Venezuela’s massive oil reserves as a source of hemispheric power and revenue. 

“If we didn’t do this, China or Russia would have done it,” Trump said.

Trump is looking to Western oil companies, including firms that joined him Friday, to revitalize Venezuela’s dilapidated oil infrastructure. He said negotiations on the “confines of a deal” would continue in private.

“We have to get them to invest and then we have to get their money back as quickly as we can,” Trump said.

Trump’s exhortations to the oil industry dovetail with a broader push to address cost-of-living concerns weighing heavily on Republicans’ bid to maintain control of Congress in November’s midterm elections. 

The president frequently touts sinking prices for oil and gasoline, which on Friday averaged $2.81 per unleaded gallon, according to the American Automobile Association, as salve for American consumers. That’s a double-edged sword. Low prices are viewed warily within the oil industry, which Trump is counting on to keep pumping crude. 

Some US oil operators, particularly independent producers, are concerned about current prices that have strained the economics of some domestic drilling. And they’re worried about the prospect of an influx of Venezuelan crude suppressing prices further, making more wells too expensive to produce. 

“I hope you’re going to build all brand new stuff, rip out the old crap that’s been there for so many years, and do it the right way,” Trump told the executives.

And though the president had previously dangled the prospect of US subsidies for overseas oil work, he said Friday that firms “will be spending at least $100 billion of their money, not the government’s money.”

Markets have already reacted to the administration’s plans to start selling upward of 50 million barrels of Venezuelan crude, including supplies that built up in storage amid the US naval blockade. 

Futures for West Texas Intermediate, the US benchmark, were hovering near $59 on Friday. 

The meeting created an awkward dynamic for oil companies that belies Trump’s predictions of bountiful Venezuelan production under US control.

Some industry representatives ahead of the meeting expressed worry that attending risked casting them as willing participants in a callously opportunistic grab for Venezuela’s crude, said people familiar with the matter. That’s especially because broad reluctance remains about investing in the country immediately. At the same time, executives need to tread a fine line with the president, who is pressing them to swiftly pledge new investments.

Adding to the tension is the strong political support Trump has enjoyed from the oil industry, including representatives in the room Friday. Hilcorp Energy Co. founder Jeff Hildebrand has also been major donor to Trump’s political operation, in addition to Hamm.

This week, executives have stressed to administration officials that any Venezuelan oil rebuild requires guarantees of physical security and contract certainty, given concerns about Venezuela’s stability under acting leader Delcy Rodriguez. While Chevron still operates in Venezuela under a special US license, Exxon Mobil and ConocoPhillips left after Maduro’s predecessor, Hugo Chávez, nationalized their assets.

Venezuela sits atop the world’s largest proved crude reserves, but its output has dwindled to less than 1 million barrels per day amid decades of disrepair and the exodus of foreign firms. 

Cleaning up environmental damage and rebuilding the country’s abandoned rigs, leaky pipelines and fire-ravaged equipment could take years — and tens of billions of dollars — simply to modestly boost production, much less approach the country’s 1970s peak of almost 4 million barrels per day. 

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