LONDON, Sept. 2 (Reuters) - President Donald Trump's plan to secure direct U.S. access to a large share of Venezuela's vast oil reserves could end up derailing the country's long-awaited petroleum revival by stifling competition, distorting markets and deterring the foreign investment needed to rebuild the South American nation’s battered energy industry.
The plan unveiled on Monday would see Washington acquire a 35% equity stake in private oil firm North American Blue Energy Partners (NABEP), which is controlled by Venezuelan businessman Alejandro Betancourt. The company would receive a 100-year lease on 17 Venezuelan oilfields holding an estimated 65 billion barrels of reserves.
In exchange, the U.S. would receive a guaranteed 20% share of production at cost and retain a right of first refusal to purchase all remaining output.
The arrangement would make NABEP the world's second-largest private oil company by reserves, behind only Saudi Arabia's national oil giant. NABEP, which currently produces around 170,000 barrels per day, says it aims to raise output to more than 1 million bpd in the near term.
The Trump administration argues that the arrangement is a key part of its “three-part plan of stabilization, reconstruction and democratic transition” for Venezuela after its removal of former President Nicolas Maduro in January. The White House adds that the deal will help the U.S. create “new robust, strategic and defensible supply chains” in the Western Hemisphere, allowing Washington to refill its depleted strategic petroleum reserves, lower fuel costs and promote the “revitalization” of U.S. manufacturing.
The proposal has already drawn fierce criticism from Venezuela's opposition and Democrats in the U.S., with some calling it akin to modern-day colonialism and others arguing that it bears the hallmarks of election-year policymaking as Trump faces growing pressure over cost-of-living concerns ahead of the crucial midterm elections in November.
What’s clear is that his proposal carries significant political, legal and commercial risks, not least the threat of hampering the recovery it’s seeking to encourage.
XLE•
