Expert Explains: ‘Companies do not have much appetite for any major new investment in Venezuela’

Since then, Venezuela has had a chequered history with the West. Western companies were invited back in during the 1990s when state-owned oil company PDVSA struggled to maintain production; production recovered, but then president Hugo Chavez forced new, adverse commercial terms on foreign companies and expropriated American assets in 2007. The US has since maintained sanctions on Venezuela. US oil companies Exxon and Conoco sued Venezuela in international courts and secured compensatory awards of over $10 billion, which are yet to be paid. Meanwhile the US has watched with concern as China’s presence in Venezuela, as investor, oil consumer and military supplier has grown. So, while the current US action to force political change in Venezuela and muscle in its oil sector is indeed drastic, it is not surprising. 

The irony is that from a purely oil perspective, the US has less reason than ever before to bother with Venezuelan oil and gas. It no longer depends on imports, having become quantitatively self-sufficient in oil and a major global exporter of natural gas over the past decade. US oil companies have been operating in a limited way in Venezuela in recent years. In fact, Chevron had its license renewed in July 2025. Furthermore, president Nicolas Maduro — fiery rhetoric notwithstanding — seems open to more Western investment. Shell and BP have been negotiating the development of Venezuelan offshore gas fields for LNG exports via neighboring Trinidad.

What are the wider global implications of Trump’s oil-related intentions?

There are some interesting angles. Trump has framed the new US national security strategy as well as his action in Venezuela in terms of the Monroe doctrine dating back 200 years, asserting US dominance over the Americas. The key element of the Monroe doctrine was for European powers to keep out of the Americas. Trump’s own disdain for Europe is rather evident. I would therefore keenly watch how European oil companies will get on in Venezuela. Repsol of Spain — the only major NATO country that rejected Mr Trump’s demand to raise defence spending — operates there. Shell and BP seek to develop Venezuela’s gas reserves.

Quite clearly, as major trading and military allies of Venezuela, both China and Russia are quite upset with the US action. They are also Venezuela’s biggest bilateral creditors, and will not take kindly to any new economic arrangements that Trump might institute that ignore their interests. So, we can expect Venezuela to also now feature in the trade and security dialogues that the US has been having with Russia and China.

How much does Venezuela need foreign oil companies?

Like many other petrostates, for example in the Middle East and Africa, Venezuela has had a love-hate relationship with Western oil interests. The Western oil companies are regarded with suspicion, as part of some neo-colonial conspiracy to grab the oil riches and keep Venezuela poor. President Trump’s assertion that the US will “run Venezuela” from now on, therefore, will only worsen matters. In fact, however, Venezuela’s own volatile, extreme politics and economic mismanagement are to blame for the poverty of its masses. The national oil company PDVSA has been denuded of technological and management expertise thanks to political interference in its affairs, and oil production has plummeted to less than a third of 2010 levels.

Venezuela wastes 45% of the natural gas it produces by flaring — a quantity roughly equal to half of India’s entire LNG imports in 2024-25, worth over $5 billion annually — due to lack of domestic utilisation or export. Foreign oil companies are needed for their technological expertise, their ability to manage any new major investment program and also in order to give confidence to lenders for financing new developments, due to the staggering debt that Venezuela is burdened with.

Are American and other Western companies likely to step up in Venezuela, as Trump wants them to?

President Trump’s announcement that US companies will step in to produce Venezuela’s oil has taken the global oil industry by surprise. Notwithstanding Venezuela’s immense reserves, US companies do not have much appetite for any major new investment there. The uncertainties and risks far outweigh potential benefits.

For one thing, Venezuela is still ruled by a regime ideologically hostile to the US, and its political course has become even more uncertain after Mr. Maduro’s extraction. PDVSA’s involvement is legally mandated for most oil development, which is problematic. The country is beset with high debt — twice as large as its GDP — and has been getting by on an oil-for-cash arrangement with China, a circumstance that weighs against new investment. Current oil prices are not particularly attractive from an investment perspective.

Although new oil development within the next few years is considered necessary in order to maintain global production, there is also a lack of confidence in the economic climate, thanks to ongoing global trade disruptions. In theory, even if Trump were to somehow get the Venezuelan government — the current regime or a new one — to grant US companies highly attractive terms (through low taxes, for instance), there would still remain the risk of such terms being honored over the decade or so that the investments typically need to pay off, by a country known for doing the opposite.

The Venezuelan state needs more tax revenue, not less, to see to the welfare of its long-suffering, restless citizens. Alternatively, the US government could itself guarantee such investments provided that investors can trust any such guarantee to survive the vicissitudes of American politics. Perhaps the biggest deterrent to any investment in Venezuela is the uncertainty as to what Trump himself might do next. Ironically, the US intervention in Venezuela may even have put at risk the gas-related investments that Shell and BP planned to make.

What is the way out for Venezuela?

From an economic standpoint, the country needs a restructuring of its foreign debt, underpinned by oil exports, and a domestic economic program that utilises the remaining oil revenue to stabilize the economy. Ordinarily that would require the IMF to be involved, and a Venezuelan government that enjoys enough legitimacy to effectively oversee such a programme while maintaining political control.

That would instill confidence in new investment to recover oil production, which is the greatest need and opportunity for Venezuela. There is a precedent, in Iraq’s situation after the 2003 invasion when Saddam Hussein was deposed by the US and its allies. Iraq, too, was burdened with great debt, low oil production, institutional collapse and a much worse internal security situation than Venezuela currently faces.

The Western oil companies negotiated fairly balanced oilfield development deals with the Government of Iraq — I know because I negotiated on behalf of Shell — which were rejected by Iraq’s parliament in 2008. Despite the US military occupation, the Iraqi government then put multiple oilfield developments to tender and awarded contracts to companies from the US, Europe, China, Russia and elsewhere on terms highly favorable to Iraq.

By 2015, Iraqi oil production had tripled compared to the period immediately after the invasion. Venezuela does have agency and a lot is up to whether it can turn this into an opportunity for a fresh start.