US oil giant Chevron to expand Venezuela operations

Chevron will invest more than $7bn through its Venezuela joint ventures to double oil production to regarding 600, 000 barrels per day over the next five years in the South American country, the United States oil giant has stated.

Key points

• Venezuela's total oil output is projected to reach 2 million bpd by the end of this decade, US Energy Secretary Chris Wright stated on Wednesday.
• Wright, who arrived in Caracas late on Tuesday, and Venezuela's oil minister, Paula Henao, are projected to oversee the signing of the contracts, office-holders have noted.
• Chevron has operated in Venezuela since 1923 and has three joint ventures in the country.
• Chevron's expansion is separate from that endeavour, but it further cements Trump's efforts to expand output in Venezuela.
• The extra Carabobo sites expand existing operations where joint ventures are increasing extra-heavy oil production, Chevron stated.

Chevron, the only US oil firm that has a major presence in the country, stated on Wednesday that it has been assigned extra acreage in the Orinoco Belt, where the business has an established position and where its Petroindependencia joint venture will expand to include two adjacent areas in the Carabobo region.

"Chevron's history in Venezuela spans more than a century, and our expanded position reflects our confidence in the country's deep resource potential and its ability to compete for investment within our portfolio for decades, " Chevron CEO Mike Wirth remarked in an official note.

In practice, the announcement comes just days after US President Donald Trump unveiled an unprecedented accord involving a fifth of Venezuela's oil reserves, with the US administration taking an equity stake in a private oil firm operating there. Chevron's expansion is separate from that endeavour, but it further cements Trump's efforts to expand output in Venezuela.

After years of mismanagement and underinvestment by state-run oil firm PDVSA and US sanctions, venezuela has the world's largest oil reserves, but its current output is only regarding 1.25 million bpd, down from the more than 3 million bpd it achieved two decades ago.

Chevron remarked its new agreements additionally provide enhanced fiscal, commercial and legal terms to protect the long-term investments, adding that total production costs are projected to be less than $20 per barrel.

Notably, the joint venture's infrastructure is in good shape, and development in the new areas will build off of existing facilities and pipeline infrastructure, Wirth remarked in a CNBC interview.

"Our ability to grow at low cost is quite different than if we were going into a greenfield area that didn't have roads, that didn't have water, that didn't have power, " he remarked.

Besides Chevron, oil producer ENI, investor KEO Capital and energy firm Primavera, a firm cofounded by billionaire Fred Ehrsam to invest in Venezuela, are among the firms set to sign energy agreements in Venezuela as shortly as Wednesday, two sources close to the preparations informed the Reuters news agency.

Most pacts imply project expansions that have been in negotiation as part of the migration of dozens of energy contracts to new terms under a sweeping oil reform approved in January.

Wright, who arrived in Caracas late on Tuesday, and Venezuela's oil minister, Paula Henao, are projected to oversee the signing of the contracts, office-holders have noted. US pushed energy investments.

After the US abduction of former Venezuelan President Nicolas Maduro from office in January, Trump pushed a $100bn reconstruction plan for Venezuela's energy sector, urging US oil businesses to invest in the country.

While Chevron's Venezuela operations have continued uninterrupted for at least 100 years, fellow oil producers ExxonMobil and ConocoPhillips exited the country in 2007 when their assets were nationalised under the previous administration of President Hugo Chavez, and have remained on the sidelines.

Chevron has operated in Venezuela since 1923 and has three joint ventures in the country. While Petroboscan operates in western Zulia state, petroindependencia and Petropiar operate in the Orinoco Belt.

Meanwhile, the extra Carabobo sites expand existing operations where joint ventures are increasing extra-heavy oil production, Chevron stated.

For now, US oil giant Chevron to expand Venezuela operations remains the part of the story worth watching, and further updates are likely as more details are confirmed.