Paying over $100 billion to rebuild Venezuela's oil industry won't be the biggest obstacle facing U.S. oil companies

By Myra P. Saefong

President Donald Trump has said that U.S. oil companies will go into Venezuela and "spend billions of dollars," to fix Venezuela's "badly broken" oil infrastructure.

For the oil market, the hype is real - the U.S. now appears to have an opportunity to more freely access crude from Venezuela, a country that's widely accepted to be home to the world's largest oil reserves.

The problem, however, might be a reluctance by major U.S. oil companies to simply jump back into the country without reassurances that the South American nation will enjoy greater political stability.

President Donald Trump said that following the removal of Venezuelan President Nicolás Maduro over the weekend, U.S. oil companies will go into Venezuela and "spend billions of dollars, fix the badly broken infrastructure - the oil infrastructure - and start making money for the country."

Yet the big question going forward will be if Trump's support for Venezuela's interim leader, Delcy Rodriguez, will improve her standing locally, or end up backfiring.

"What happened is they nabbed Maduro, but the regime is still in place," said Steve Hanke, a professor of applied economics at Johns Hopkins University and a chief economic adviser to former Venezuelan President Rafale Caldera from 1995 to 1996.

"One of the reasons the elites and Wall Streeters ended up backing Rodriquez is that it means no regime change," said Hanke, who's also chief adviser to the opposition coalition. Venezuela's bonds on Monday and those of its state-owned oil company rallied as investors bet on a more favorable potential outcome for their holdings in any restructuring of the nation's debts.

"The bonds are a huge, huge factor," Hanke said. "There's been a bull market in these bonds in anticipation there will be a regime change," he said. "To some extent, the big rally we've seen today, is a little bit of putting the cart before the horse."

Any attempt to overhaul Venezuela's oil industry will take a lot of time and money, and also require getting the locals and the nation's military on board, said Hanke. "They don't like Washington telling them what to do - that's pretty much across the board," he said.

Still, an actual regime change in Venezuela would "immediately represent one of the largest upside risks to the global oil-supply outlook for the 2026-2027 [period] and beyond," said analysts at J.P. Morgan in a Sunday client note.

"With a stable political environment, renewed licensing, restored diluent flows and unrestricted Chevron operations, supply could rapidly rebound to around 1.2 [million barrels per day] within a few months," they said. That would represent a roughly 250,000 barrel-per-day increase from Venezuela's 2025 average output of around 900,000 to 950,000 barrels per day, they said.

Yet the situation in Venezuela remains far from stable and U.S. oil companies have been burned before, when past leaders there decided to nationalize its oil industry in the 1970s. And in the 2000s, former President Hugo Chávez required majority ownership by state-owned Petróleos de Venezuela S.A. of any joint ventures, reportedly causing U.S. oil majors to lose billions of dollars.

U.S. oil companies, however, will want a "stable regime in the country before they would consider investing heavily," said strategists at Societe Generale led by Michael Haigh, global head of commodities research.

Read opinion column: These stocks stand to gain as the U.S. tightens its grip on Venezuelan oil

Venezuela having the world's largest proven oil reserves, at an estimated 303 billion barrels, or roughly 17% of the world's total, doesn't automatically mean the market will see more oil, the strategists at Societe Generale said.

Venezuela's oil production reached roughly 3 million barrels per day before plummeting in 2003 in the wake of a nationwide strike by oil workers.

"Despite crude in the ground, the country's production and infrastructure are far below optimal," they said. "Restoring Venezuela's oil industry to its former peak level" - around 3 million to 3.5 million barrels per day before its long decline, would be a "massively expensive and long-term effort."

Consensus analyst forecasts suggest it could cost $10 billion to $20 billion a year over a decade to reach around 2.5 million barrels per day, without full modernization of Venezuela's oil infrastructure, they said.

Read: Regime change in Venezuela could bring boost in oil production - but not as much as you'd think

Fully transforming and expanding the country's oil infrastructure could cost $180 billion to $200 billion if the goal includes major upstream development and maintaining high production growth, the strategists said, citing research from Hart Energy.

Trump said during a press conference on Jan. 3, according to a rollcall.com transcript, that it will cost billions of dollars to rebuild the oil infrastructure and that would be "paid for by the oil companies directly." He also said those oil companies will be "reimbursed for what they're doing" but did not offer further details.

In comments sent to MarketWatch, White House spokeswoman Taylor Rogers said that "all of our oil companies are ready and willing to make big investments in Venezuela that will rebuild their oil infrastructure, which was destroyed by the illegitimate Maduro regime."

"American oil companies will do an incredible job for the people of Venezuela and will represent the United States well," she said.

The note from Societe Generale included a chart of capital-expenditures plans by top oil U.S. majors through 2030. Focusing on just five of the companies - Exxon Mobil Corp. (XOM), Chevron Corp. (CVX), Shell PLC (SHEL), ConocoPhillips (COP) and Occidental Petroleum Corp. (OXY) - resulted in a roughly $413 billion total over the next five years, keeping in mind that the budgets are sensitive to oil prices.

While the headline figure of total capex "far exceeds the most conservative level to restore Venezuela's oil industry," which stands at $180 billion to $200 billion, Societe Generale strategists pointed out that Venezuela has nationalized its oil industry "not just once, but twice" before.

That will make the oil majors "incredibly cautious about getting back into the country," they said.

Overall, the return of U.S. oil companies to Venezuela is "a challenge that would require an act of faith in terms of country stability and an act of faith" in terms of predicting end-of-the-decade oil prices (CL.1) (BRN00), said Tom Kloza, chief oil analyst at Gulf Oil.

He told MarketWatch that he agrees with Venezuela experts "who believe that no returns would be likely until elections are held this summer - [and] of course it would depend on the normalcy of those elections."

Joy Wiltermuth contributed to this report.

-Myra P. Saefong

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01-05-26 1632ET

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