Five things to know about oil in Venezuela : NPR

A few hours after US troops captured Venezuelan President Nicolas MaduroPresident Trump has made clear that the US operation is aimed, at least in part, at controlling Venezuelan oil.

“We're going to have our very large U.S. oil companies, the biggest in the world, invest billions of dollars, rebuild badly damaged infrastructure, oil infrastructure, and start making money for the country,” Trump said during a Saturday news conference.

The hijacking of Maduro and Trump's comments comes at a time when even a country like Venezuela, which has some of the world's largest oil resources, is not a reliable choice for attracting major oil companies.

Many oil companies have suffered from their past experiences in the country. The global oil market is currently facing oversupply. Oil prices are below $60 a barrel and long-term oil demand forecasts are unclear as the world shifts to more electric vehicles.

Trump promises to “run the country” and make room for US oil companies in Venezuela. However there is long history of US interventions Things aren't going well in Latin America and the Middle East, oil experts tell NPR.

Here's what you need to know about Venezuela's oil.

Venezuela has huge oil reserves, but now produces only a fraction of what it used to.

Venezuela was once one of the world's largest oil producers and one of the main founders of the Organization of the Petroleum Exporting Countries (OPEC), the group of the world's largest oil producers whose decisions help determine global oil prices. Venezuela has largest proven oil reserves in the worldAccording to OPEC.

But while the country was producing over 3 million barrels per day several decades agoToday, Venezuela produces only about a million barrels a day, or about 1% of global oil production. The US produces about 13 million barrels per day.

Most of Venezuela's oil went to refineries in the United States. Now most of it goes to China.

Not all crude oil is the same: some oil is physically lighter and easier to process in refineries. Venezuela's oil is heavy and dense and requires special refineries to process it. Burning any type of oil contributes to climate change, but Venezuela's oil is “one of the dirtiest types of oil in the world when it comes to global warming,” says Paasha Mahdavi, an assistant professor of political science at the University of California, Santa Barbara.

Venezuela owes US oil companies billions

American oil companies such as Chevron began drilling in Venezuela about a century ago and played a key role in the development of the country's oil sector.

But between 2004 and 2007, then-President Hugo Chavez “virtually forcibly renegotiated contracts” with international oil companies, says Francisco Monaldi, director of the Latin American Energy Program at Rice University's Center for Energy Studies.

ExxonMobil and ConocoPhillips left the country in 2007 and then took the Venezuelan government to international arbitration courts. Courts ordered Venezuela to pay ConocoPhillips more than $10 billion and ExxonMobil more than $1 billion. Venezuela paid only a portion of these amounts to ExxonMobil and ConocoPhillips.

Chevron, however, stayed in Venezuela even though “they didn't like it,” says Gerald Kepes, president of Competitive Energy Strategies, an energy consulting firm in Washington, D.C.

Chevron now produces about a quarter of Venezuela's oil.

In response to news of Maduro's arrest, Chevron spokesman Bill Turenne said in an email: “Chevron remains focused on the safety and well-being of our employees and the integrity of our assets. We continue to operate in full compliance with all relevant laws and regulations.”

Trump said Venezuela “stole” American investment in the country's energy sector.

Will US oil companies return?

Venezuela is what the oil industry calls a “brownfield,” meaning it is well established and oil companies have a pretty good idea of ​​what they will find when drilling. For companies like ConocoPhillips, returning to Venezuela could be an opportunity to recoup some of the billions the government owes them, Monaldi said.

In an email, ConocoPhillips spokesman Dennis Nuss wrote: “ConocoPhillips is monitoring developments in Venezuela and their potential implications for global energy supply and stability. It would be premature to speculate on any future business activity or investment.”

ExxonMobil did not respond to a request for comment.

However, now is not the best time to increase global oil reserves, Monaldi says. There is currently an oil glut all over the world. Additionally, because Venezuela's oil is particularly bad for the climate, that makes it less attractive to European oil companies with climate goals, Monaldi says.

Venezuela's neighbor is a rising oil star

Next door to Venezuela is Guyana, a country that recently discovered more than 10 billion barrels of oil and is key emerging player in the international oil industry.

Guyana's oil is lighter than Venezuelan oil, less polluting and has lower taxes than Venezuelan oil, Monaldi said. Guyana also does not have a national oil company like Venezuela.

“All of this makes Guyana one of the most attractive oil destinations in the world,” says Monaldi.

Although ExxonMobil is no longer based in Venezuela, it is a major player in Guyana.

For many years, there was a territorial dispute between Venezuela and Guyana, which also involved oil rights. Last March Venezuelan vessels entered Guyana's territorial waters and approached offshore oil vessels. owned by ExxonMobil.

“Without a doubt, Guyana should feel more secure with the regime change,” says Monaldi.

Lack of political stability could be an obstacle to a deal

Some increase in oil production in Venezuela could happen quite quickly with more financial support and improved management. according to analysis by Wood Mackenzie, an energy consulting firm..

But Mahdavi says the Trump administration's plans to jump-start the industry will be difficult. He notes that it took nearly two decades to revive Iraq's oil industry after the US invasion, although corruption and mismanagement remain widespread.

And ultimately, Kepes notes, if it's unclear who's in charge in Venezuela, oil companies will be concerned about the long-term viability of their contracts. “No one is going to start investing locally in a place where there is no legal contract and valid permission to operate, or where there are concerns about political stability and violence,” he says.