Trump says US has a deal to take huge stake in Venezuela’s oil reserves
The president said the plan would help replenish U.S. oil reserves and drive down gas prices.
President Donald Trump disembarks Air Force One upon his arrival at Joint Base Andrews, Maryland, on Aug. 28.Luis M. Alvarez/AP
President Donald Trump announced on Friday that Venezuela agreed to give the U.S. majority of control of more than 65 billion barrels of proven oil reserves in the South American country, a deal he said would more than double U.S. oil reserves and eventually lower gas prices.
The announcement comes amid widespread frustration over high gas prices as a result of the Iran war, which has also depleted the U.S. strategic petroleum reserve.
“This Transaction will greatly strengthen the already growing relationship between Venezuela and the United States!” Trump wrote on Truth Social.
The agreement would cover a fraction of Venezuela’s 300 billion barrels of proven oil reserves. Venezuela’s estimated crude oil reserves are among the largest in the world, representing about 20 percent of total supply, according to the Energy Information Administration.
Trump credited Secretary of State Marco Rubio and Defense Secretary Pete Hegseth with negotiating the deal with Venezuelan President Delcy Rodriguez, who was installed as the leader after the U.S. launched a military operation to seize Nicolas Maduro. Energy Secretary Chris Wright was scheduled to fly to Venezuela next week, three people in the oil industry familiar with the plans said, though it was unclear whether the trip was connected to Trump’s Friday announcement.
Several independent oil companies signed contracts earlier this month to drill for oil in Venezuela, though none of them have any history working in a region challenged by lack of investment and chaotic governing. Giant oil company Chevron has also been operating in Venezuela for years.
The U.S. has largely controlled exports of crude oil from the South American nation since snatching Maduro from his home in early January. The news appears to give the Trump administration more direct control over the country’s fields, though developing the tar-like deposits of oil and shipping it to the coast for export is likely to take years.
A U.S. official, granted anonymity to share details of the arrangement, described the deal as a new private joint venture between the U.S. government and an “experienced private operator in Venezuela,” but did not name the company.
The new venture will be the second-largest private oil company in the world, after Saudi Aramco, the official said, with the U.S. effectively controlling 55 percent of the venture’s output through a combination of equity ownership and guaranteed access to oil at cost.
“As the company scales production, the resulting stable supply of at-cost oil in our Hemisphere will go toward filling the U.S. strategic petroleum reserve and fulfilling the supply needs of our Great U.S. Military,” the official said.
The deal isn’t final yet, said one of the oil industry executives, who was familiar with the plan and granted anonymity to discuss non-public details. “It’s complicated, it’s built on a legal environment that does not exist. The Venezuela constitution does not allow for anyone other than PDVSA to own rights to oil and gas in the country,” the person said.
But the White House is still keen to promote the idea, this person said. “The end of story is the president wants to say we have billions of barrels of oil in reserve. That would act as a price stabilization nuclear bomb. Oh, the Iranians have blocked Hormuz? The president could say. ‘I have 65 billion barrels in reserve.’”
Any company looking to join the Trump administration in such a venture would face a number of problems, said David Goldwyn, president of international energy advisory firm Goldwyn Global Strategies. Those include the lack of pipelines in the country, constrained export facilities and the possibility of new administration in either country deciding they don’t want to participate in the deal.
A bigger problem might be the reputational and financial hit such a company might take, Goldwyn added.
“I have to wonder why a U.S. company ... would want to put a target on its back and become a national pariah by taking up a noncompetitive undertaking with the U.S. government,” Goldwyn said. “And if your obligation is to sell a share or all of your production into the United States, rather than being able to put it on the open market, you are locking yourself into a less optimal [profit] than you’d have with any other project.”
The announcement comes as Trump stares down a challenging midterm election in which the cost of living, including high gas prices because of the ongoing war with Iran, is a key issue dogging Republicans on the campaign trail. The average price of a gallon of gas was $4.09 as of Friday, according to AAA, hovering at the highest prices on record for this time of year.
Experts have said that on top of the difficult task of tapping Venezuela’s fields, the country’s energy infrastructure has deteriorated significantly over the decades and needs billions of dollars in new investment to become functional at scale.
U.S. refiners are well-positioned to process Venezuela’s heavy crude, but U.S. those plants have been running at near-maximum capacity for weeks and are not positioned to handle any significant infusion of new crude.
Rubio said in a social media post that the new deal would benefit both the U.S. and Venezuela. "For the Venezuelan people, this deal will bring nearly $100 billion in private investment, support thousands of high-paying jobs, and drive the reconstruction of Venezuela’s economy,” he said on social media.
Details on the plan remain vague, but using the power of the U.S. government to remove some of the risk for companies that want to start drilling in the South American country could speed the development, said Landon Derentz, an energy and national security adviser in the first Trump administration and Obama administration, now at the think tank The Atlantic Council.
“If the Delcy Rodríguez government and the Trump administration can find a pathway to deploy capital, this is going to send a signal to the market that this is a place to do business,” Derentz said. “Conceptually, yes, this could work.”
Without U.S. support, Venezuela will not be able to expand their oil exports in a meaningful way, said Rich Goldberg, former senior council of the White House Energy Dominance Council.
“They need a lot of support, they cannot do this on their own because of the years of corruption and decay in the oil sector,” he said. “It sort of makes sense that we would be bringing a lot to the table to have an accelerated timeline for more U.S. companies to come in and develop and produce and then export.”
But taking direct control of Venezuelan oil fields — even if it happens — would do little to change prices anytime soon, said Greg Brew, senior analyst at geopolitics consulting firm Eurasia Group.
“The idea that this will lower domestic US gas prices at any point in the near future is...tenuous, at best,” Brew said in a post on social media. “Gas prices are currently high because of the US confrontation with Iran, the war in Ukraine, and a relative shortage of global refining capacity. Some oil in Venezuela--the commercial viability of which is largely theoretical--does little to address this.”
The Trump administration has been frustrated by U.S. companies’ reticence to reenter Venezuela, where several companies, including Exxon Mobil, saw previous assets worth billions of dollars seized by the government after former President Hugo Chavez nationalized the industry.
The administration has been putting pressure on Rodriguez to have the country’s state-run oil company sign contracts with American companies, and she last month unveiled new regulations offering more favorable terms to international oil companies. And top administration officials traveled to Caracas in late April to secure memorandums of understanding that laid the groundwork for the kind of deal the president announced Friday.
But the prospect of one of the world’s wealthiest countries taking the natural resources of an impoverished country like Venezuela will cause immediate political consequences for the Rodriguez government, said Brett Erickson, managing principal of Obsidian Risk Advisors.
“The obvious risk is the people who are already very much struggling will riot and rise up and see this as being a clear raping of their resources, which it is,” Erickson said. “It doesn’t take a rocket scientist to see that this is a very corrupt deal and completely against the will of the Venezuelan people. These are their natural resources.”
Daniel Di Martino, a Venezuelan-born economist and fellow at the Manhattan Institute, a conservative think tank, said the deal will unlock more oil production if it reduces the “uncertainty for oil companies regarding the returns of their investments in Venezuela post-Trump.”
“That will be hard-to-impossible to do if Delcy remains in power,” Di Martino said.
James Bikales contributed to this report.