In January, at a televised White House meeting, ExxonMobil (XOM) chief executive Darren Woods said Venezuela appeared “uninvestable” without significant changes to the country’s commercial frameworks, legal system and hydrocarbon laws.
It is September, and Exxon is close to signing.
What happened in between is the interesting part, and it is not a change of heart. Venezuela overhauled its oil-related regulations, including allowing lower tax rates on production. Continental Resources cited exactly those changes in a news release Wednesday as the reason it could move forward. Woods named his conditions in public and they were met — which is, whatever else you think of it, how a negotiation is supposed to work.
Why Washington wants this
Geography and chemistry. The Journal reports that President Trump, Secretary of State Marco Rubio and others have tried to refocus the global energy industry on the Western Hemisphere, prodding companies to pour $100 billion into Venezuela to revive its depressed production and ship the oil to U.S. refineries.
The chemistry matters more than it sounds. Venezuela produces the type of heavy crude that U.S. Gulf Coast refineries prefer for making gasoline, diesel and jet fuel. American refineries were largely built for heavy sour crude, which is why a nation producing record volumes of light shale oil still imports. With the Strait of Hormuz largely shut for months and Middle Eastern supply arteries closed off, a heavy-crude source a short tanker trip away is worth a great deal.
And that connects directly to the diesel problem in this edition. The bottleneck is refining, not drilling — and feeding the right crude to existing refineries is one of the few levers that touches it.
Who is moving, and how fast
Chevron (CVX) went first and largest: a $7 billion commitment over five years through its joint ventures, aiming to double output to 600,000 barrels a day.
Exxon is negotiating a potential return nearly two decades after its exit, with a memorandum possible this month. The Journal reports the deal could encompass fields collectively holding 50 billion barrels of oil. Venezuela says it has around 300 billion barrels of reserves — which would be the largest in the world.
Harold Hamm, founder of Continental Resources and one of the president’s closest allies in the oil patch, signed a nonbinding memorandum with Petróleos de Venezuela on Wednesday at the G-20 Energy Abundance Ministerial in Houston, for an undeveloped field in the state of Anzoátegui. Chief executive Doug Lawler, who has traveled to Venezuela twice this year, said the company hopes to sign a production-sharing agreement in the coming weeks but couldn’t say how much it would invest.
Hamm’s framing was characteristically expansive: “We talk about the energy renaissance. I think this can also be the energy renaissance that’s necessary in Venezuela.” He believes the influx could push production beyond 3 million barrels a day, its peak from decades ago.
The risk nobody is pretending away
Several large oil-and-gas companies have hesitated to commit capital here, wary of financial and legal problems in a country with a track record of nationalizing private companies’ assets. Exxon knows this better than most — that is why it left.
Which is the useful investment frame. A revised hydrocarbon law is a promise, and a promise from a government is worth what the next government says it is worth. The reserves are real and the refinery fit is real; the enforceability is the variable, and it cannot be hedged.
For a household portfolio the practical read is modest: this is a long-dated option embedded in companies you may already own, not a reason to own them. Neither Exxon nor Chevron will live or die on Venezuelan barrels that need years and enormous capital to arrive.