Developing Venezuela's "world's largest oil reserves"? Trump's "idealistic" but "harsh reality"

The "lightning strike" operation by the United States against Venezuela not only changed the political landscape of the country, but also pushed the energy fate of the world's largest oil reserve country to the forefront. Despite President Trump's declaration that the recovery of Venezuela's oil industry will be led by major U.S. oil companies, the industry generally believes that due to infrastructure collapse, legal risks, and political uncertainty, the recovery of the country's oil production will be a long and difficult process. According to reports from Xinhua News Agency and CCTV News, Trump confirmed that the U.S. has captured Venezuelan President Maduro through military action and announced that the U.S. will "manage" Venezuela until a "safe" transition is achieved. Trump emphasized that major U.S. oil companies will invest billions of dollars to repair the country's severely deteriorated oil infrastructure. Venezuelan opposition leader Maria Machado immediately stated that the "people's sovereignty" has arrived and is ready to take over power. Although the geopolitical upheaval has attracted attention, its immediate impact on the global oil market is relatively limited. Data shows that although Venezuela has 303 billion barrels of oil reserves, its current daily production is only about 1 million barrels, accounting for about 1% of global production. Analysts point out that due to the current oversupply in the global market and the time needed for Venezuela's production capacity to recover, oil prices are unlikely to skyrocket out of control in the short term. However, for the energy vision painted by Trump, Reuters cited analysis from several industry experts pointing out that even if there is a change in government, the recovery of the Venezuelan oil industry will not be an overnight success. From long-term underinvestment to complex debt disputes, U.S. oil giants returning to Venezuela face "grim" reality challenges. A gap in production capacity that is difficult to overcome Despite Trump's promise that U.S. companies will intervene quickly, Reuters analysis suggests that even with billions of dollars in funding, Venezuela's oil production is unlikely to significantly increase in the next few years. As a founding member of OPEC, Venezuela's daily production in the 1970s reached as high as 3.5 million barrels, accounting for over 7% of global production at the time. However, since 1999, due to mismanagement, lack of investment, and international sanctions, the country's energy infrastructure has deteriorated significantly. Currently, its daily production has dropped to about 1 million barrels, and most of it is expensive to process and heavily polluting extra-heavy oil. Francisco Monaldi, director of the Latin American Energy Project at Rice University's Baker Institute, pointed out that with problems such as insufficient drilling, frequent power outages, and equipment theft, there are significant physical barriers to restoring production capacity. Energy strategist Thomas O'Donnell told Reuters that if the political transition goes smoothly, repairing infrastructure and rationalizing investment may take five to seven years before significant production increases are seen. Prerequisites for the return of giants For U.S. oil giants such as Exxon Mobil and ConocoPhillips that once had assets in Venezuela, the conditions for returning to the Venezuelan market are extremely stringent. According to Reuters, analysts generally believe that U.S. companies will not act rashly until they ensure payment guarantees, minimal security, and formal lifting of U.S. sanctions. Historical legacy issues are also a major obstacle. Venezuela nationalized its oil business in the 2000s, leading to the withdrawal and arbitration of foreign investment including Exxon Mobil and ConocoPhillips. Currently, Chevron is the only U.S. major oil company still operating in Venezuela. Francisco Monaldi analyzed that ConocoPhillips may be one of the companies most willing to return, as Venezuela owes it more than $10 billion, and returning to the country may be the only way to recover the debt. A spokesperson for the company, responding to Reuters' inquiries, said they are monitoring the situation but did not disclose specific investment intentions. Mark Christian, director of business development at CHRIS Well Consulting, emphasized that Venezuela must reform its laws to allow foreign oil companies to make larger investments. Political vacuum and security risks In addition to commercial considerations, the uncertainty of geopolitics is a key factor hindering investment. Brian Fonseca, director of the Jack D. Gordon Institute for Public Policy Studies, warned that the next 48 hours are crucial, as the removal of Maduro will not automatically dismantle his power structure, and the country faces the risk of internal conflict or civil war. Phil Flynn, senior market analyst at Price Futures Group, pointed out that if the Venezuelan military supports the opposition, it would be positive for the market; on the other hand, if the situation escalates into conflict, the market reaction will be different. In addition, Ed Hirs, an energy researcher at the University of Houston, warned that looking back on history, regime change in Iraq and Libya did not bring significant oil benefits to U.S. companies, and he is concerned that this history may repeat itself in Venezuela. Currently, Chevron has stated that it is focusing on employee safety and asset integrity, and will continue to comply with all laws and regulations. Until the situation becomes clearer, other international capital is expected to remain cautious. Market response: Oil price and gold price Due to market expectations of oversupply, the direct impact of this event on commodity prices has been restrained. Oil prices have been suppressed this year due to weak demand and expectations of increased production by OPEC+. Phil Flynn stated that although there may be a short-term boost on a psychological level, Venezuela's current oil supply can easily be replaced by other global producers. In terms of precious metals, Venezuela's gold production accounts for a small portion globally. Analysts believe that unless the U.S. further increases military involvement and Venezuela takes aggressive countermeasures leading to an escalation of the situation, the support for gold prices from this event will be limited in the short term. Overall, although Trump is trying to restart Venezuela's vast oil machine through "management," facing broken infrastructure, complex legal disputes, and an extremely unstable political environment, this vision is unlikely to actual production output in the short term. This article was reprinted from Wall Street News, edited by GMTEight: Chen Wenfang.