Trump's Venezuela oil deal: 65 billion barrels for a company that pumps 200,000 a day?

The El Palito refinery in Puerto Cabello, Carabobo state, Venezuela. [AFP]

Donald Trump's plan to develop Venezuelan oil fields through a private company and collect a share of the profits is drawing skepticism before a single barrel has been pumped. Critics say the firm the Trump administration has chosen lacks the capacity to execute a project of this scale, and they are questioning the economic viability of the fields themselves. Opposition to the deal is already fierce inside Venezuela, and there are doubts about whether a 100-year contract signed by a transitional government can survive a change of power.

According to statements released Monday by the United States and Venezuelan governments, a Venezuelan oil company called North American Blue Energy Partners, or NABEP, will develop 17 domestic oil fields over the next 100 years. The US government will acquire a 35 percent stake in the company and gain "preferential access" to 20 percent of NABEP's oil output at cost.

President Trump has said the arrangement will allow the United States to replenish its Strategic Petroleum Reserve, which has fallen sharply in recent years. But the ambitious plan is already drawing criticism. Analysts say the contract contains significant gaps that would prevent it from delivering the massive oil production Trump has promised.

The most immediate question is whether NABEP has the capacity to execute a project estimated to be worth $100 billion.

Venezuela nationalized its oil industry decades ago, and the state-owned company PDVSA has long dominated the sector. By comparison, NABEP is a small-scale operator, producing around 200,000 barrels per day — an annual output of roughly 73 million barrels.

Under the deal, NABEP would gain access to reserves of 65 billion barrels — more than the entire 46 billion barrels of proved US reserves. The company has said it plans to raise daily output to 1 million barrels within a few years and ultimately to 1.6 million barrels per day.

US Energy Secretary Chris Wright (left) and Venezuelan Acting President Delcy Rodriguez shake hands after signing an agreement on the expansion of Chevron's operations in Venezuela at Miraflores Palace in Caracas on Wednesday (local time). [Reuters]

Multiplying daily output 7.5-fold is not a matter of opening more valves. It would require a massive infusion of capital and time on the scale of rebuilding a country's entire energy infrastructure. Politico reported that oil company executives and Venezuela specialists are skeptical about entrusting such a project to a single small private firm. One oil company executive told Politico the deal was "too big for a company with no capacity and no credibility." Alejandro Sucre, an investor who manages a fund that invests in Venezuelan oil projects, said that while backing a single company could serve as a starting point, a broader approach was needed. "Giving 65 billion barrels of reserves to just one company makes no sense," he said. The implicit message: the project would only be viable if other companies shared the work alongside NABEP.

The economic viability of the 17 fields covered by the deal is also in question. According to Politico, roughly half the fields included in the agreement produce extra-heavy crude and are located in the Orinoco Belt, hundreds of kilometers from the coast — not positions that allow for direct maritime transport after drilling. Evanan Romero, a former PDVSA executive and oil consultant, said many of the fields had been deemed uneconomical until the 22nd century. "Most of the fields around Lake Maracaibo in eastern Venezuela included in this deal are depleted and lack the power and pipeline infrastructure needed to expand production without massive investment," he said. Another oil industry executive said developing those reserves would require at least a decade and hundreds of billions of dollars.

The terms of the deal, including the lease period, have also raised questions. A White House fact sheet states that the Venezuelan government is granting 100-year access to the fields. But Venezuelan Acting President Delcy Rodriguez announced the lease term as 25 years.

Even accepting a 100-year lease, it is far from certain that a future government would honor a contract signed by a transitional administration. Inside Venezuela, the deal has drawn opposition from across the political spectrum — from hardliners who backed former President Nicolas Maduro's iron-fisted rule to opposition figures who spent decades facing political persecution. The hardliners argue the deal hands the country's most vital industry to the United States; the opposition contends the transitional government lacks the legitimacy to sign a contract of this magnitude on behalf of the nation. If a presidential election brings a change of government, there is no guarantee the deal will survive.

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