US set to take control of Venezuela’s key oil fields
Photo: Venezuela may cede control of its oil to the US (Getty Images)
The Trump administration is finalising a deal to secure long-term access to a portion of Venezuela's oil reserves. The agreement, which could be signed imminently, would allow US companies to develop a group of Venezuelan fields with guaranteed crude shipments to the US, according to Reuters.
What the deal entails
According to sources, the deal is being negotiated at the highest levels of the US and Venezuelan governments. The legal framework under consideration involves leasing the fields, followed by an auction or tender to allocate each of them among American producers.
The list of 17 fields reviewed by Reuters includes both new blocks in the vast Orinoco Belt and already producing areas of Lake Maracaibo, part of which are currently controlled by a small Chinese company that secured a contract under the Maduro administration.
Venezuela is also considering leaving OPEC as it strengthens ties with the US, Bloomberg reported. The country has been a founding member of the cartel since 1960 but has for years failed to meet its production quotas due to the decline and corruption plaguing the state oil sector.
Legal hurdles
Venezuela's current hydrocarbons legislation does not provide for the leasing of oil blocks, and the constitution reserves the core activities of the sector exclusively for the state.
Although recently reformed oil laws allow for the development of fields through joint ventures and production-sharing agreements, the Venezuelan government has for decades not permitted foreign producers to book the country's reserves on their balance sheets. Experts suggest the prospective deal could raise constitutional questions and face legal challenges.
Why it matters to the US
Since the US captured and removed former President Nicolás Maduro from power in January, Washington has been seeking to secure a steady flow of Venezuelan crude for American refineries, while encouraging investment in the country's dilapidated energy sector, which currently produces some 1.25 million barrels of oil per day.
The Trump administration faces pressure ahead of the midterm elections amid rising gasoline prices, which could be eased by cheaper crude supplies. The US is also looking for ways to replenish its Strategic Petroleum Reserve, which currently holds around 290 million barrels - barely 41% of total capacity.
According to Axios, which first reported on the talks, US Energy Secretary Chris Wright plans to visit Caracas as early as next week.
Over the summer, US Secretary of State Marco Rubio was granted unprecedented authority in Venezuela, with Washington establishing decisive influence over the country's financial system, oil industry, and state institutions.
President Trump has also previously suggested that a potential military operation in Cuba could follow the model of Washington's recent actions in Venezuela.
