Source : THE AGE NEWS
The only thing missing from Donald Trump’s Venezuelan oil deal, so far, is Donald Trump Jnr.
It has all the trademarks of a Trump deal, combining boldness and aggression with self-interest, albeit without, to date, Trump family participation.
Early this year, the Trump administration kidnapped Venezuela’s president, Nicolás Maduro, seized control of its oil revenues and gave its backing to the country’s unelected vice-president, Delcy Rodriguez.
According to Financial Times estimates, the US has collected about $US13 billion ($18 billion) of revenue from Venezuelan oil sales – ostensibly on Venezuela’s behalf – but it would seem only a fraction of the proceeds, held in a trust account in Qatar to protect them from US courts, have found their way back to Venezuela.
After Maduro’s capture, Trump prophesied a boom in US oil company investment in Venezuela. Apart from Chevron, which retained operations in the country after the assets of other US oil companies were expropriated and nationalised by the Chavez regime in 2007, there’s been little if any activity.
Venezuela’s oil production remains at around a million barrels a day, a far cry from the 3.5 million barrels a day it was producing in the 1970s, before the first wave of nationalisation, or the 2.5 million barrels a day it was producing as recently as 2014. Where there were more than 200 oil rigs operating in 2014, there are less than a handful today.
The US oil majors have shown little interest in investing, again, in a politically unstable and dangerous environment and in an industry degraded by decades of underinvestment, to extract oil so viscous that the costs of extracting it produce relatively unattractive margins and returns on capital.
Trump, having provided the world with the biggest energy shock in history – and driven US gasoline and diesel prices up dramatically – by attacking Iran, has responded to the lack of interest in his grand vision for exploiting Venezuela’s vast oil reserve – it claims to have the world’s largest reserves, more than 300 billion barrels – with what he described last week as “the biggest oil deal in world history”.
Under the deal agreed with Rodriguez or, as the US described them, the “Venezuelan interim authorities”, Venezuela has granted a private company, North American Blue Energy Partners (NABEP), 100-year concessions over 17 oil fields with “proven” oil reserves of about 65 billion barrels.
NABEP, in turn, has granted the US Department of War’s Office of Strategic Capital a 35 per cent interest in its corporate parent “at no cost to the US taxpayer”, which Trump said would generate hundreds of billions of dollars in value for the US taxpayer.
The US will have the rights to buy, at production cost, 20 per cent of the off-take from all NABEP’s current and future fields and will have first right of refusal to acquire the remaining 80 per cent, at market prices.
The US government will have veto powers over the appointment of NABEP board members and a majority of the board will have to be US citizens.
NABEP, the administration said, had developed “an ambitious plan” to rapidly scale up production by investing $US100 billion in new oil infrastructure.
NABEP is controlled by a controversial Venezuelan businessman, Alejandro Betancourt, and is the second-largest oil producer in the country behind the state-owned Petroleos de Venezuela, or PDVSA. It produces about 200,000 barrels a day.
Betancourt, who made his original fortune by winning no-bid power contracts from the Chavez government, has been accused of corruption, money laundering and embezzlement, but has not been charged with any of those offences. Until May, he was prevented from leaving Britain, where he lives, while fighting a Swiss extradition request.
He is, however, regarded as very capable and a skilled negotiator and dealmaker who has built a good relationship with the Trump administration and with the oil companies NABEP will need if it is to fund the $US100 billion or more required to meet the administration’s ambitions.
That won’t be easy. A change of regime in Venezuela would immediately threaten a deal seen by all sides of politics in the country as neocolonialist and exploitative.
A change in government in the US might also see Washington’s commitment and current control of the country’s finances evaporate – the Democrats have made no secret of their distaste for the nature of US involvement in Venezuela or their intention of investigating US management of Venezuela’s oil income.
In the circumstances, why would any major oil company risk committing tens of billions of dollars over a decade or more? Exxon has famously described Venezuela as “uninvestable”, which seems apt.
The deals disclosed last week might be costless to the US taxpayer today, but will the Office of Strategic Capital (established by the Biden administration to invest in critical technologies and supply chains) be asked to bail out the NABEP venture if other investors don’t show up?
Trump, of course, loves to project a strongman image and has an obsession with oil. The latest Venezuelan adventure combines both.
The kidnapping of Maduro was ostensibly on charges of narco-terrorism, but from the outset Trump made it clear a major motivation was gaining control of oil – just as he once boasted that his failing war on Iran would give the US control of that country’s oil and gas infrastructure and oil revenues.
Now, he says the deal with Rodriguez and NABEP will result in millions of barrels of Venezuelan oil being processed in US refineries and supporting billions of investment in the US and thousands of jobs.
Why would any major oil company risk committing tens of billions of dollars over a decade or more? Exxon has famously described Venezuela as “uninvestable”, which seems apt.
He also said it would ensure a stable supply of low-cost oil that would facilitate the refilling of the US Strategic Petroleum reserve “which Joe Biden depleted to historic lows”.
Venezuelan oil won’t be low-cost. It can be processed by refineries along America’s southern border that are capable of handling its heavy crudes, but its qualities make it quite unsuitable for the US strategic reserve, which contains lighter US crude.
That reserve was depleted by Biden. It dropped from 638 million barrels to 415 million barrels over his term, largely because of releases to try to offset the impact on the oil market of Russia’s invasion of Ukraine.
It has subsequently dropped to its lowest levels in 40 years – about 290 million barrels – after the Trump administration promised to release 172 million barrels to offset the impact of the US-Israeli war on Iran. Biden isn’t solely responsible.
Trump’s new Venezuelan deal is very Trump. The headlines are bold and describe game-changing action and policies – before the detail and the administration’s ineptitude inevitably undermines their execution.
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