(BOE Report) – In a downtown Houston bar, Matthew Goitia, a director at Pelorus Terminals, lays out his early idea to refurbish and build marine terminals that can blend and export crude and ship chemical products in Venezuela.
The ambitious plan he estimates would cost $250 million to $1 billion requires him to refurbish an existing crude oil marine terminal in Venezuela, build a new oil one and then convert the older facility to move chemicals and other products. He is also considering adding storage tanks, overhauling the docks and will have to ensure power supply, all of which could take between three and 10 years.
There is plenty to iron out, and it’s not yet clear how to get U.S. government permission to do any of it. Any move into the country will also likely need lots of support from local officials and state oil company PDVSA, but that’s not stopping early ideas from emerging.
In offices across the city at the heart of the U.S. oil industry, executives, entrepreneurs and chancers are looking for a way to get a piece of the work to plumb Venezuela’s huge crude oil reserves – estimated as the world’s largest.
“The small guys are willing to take the risk, Venezuela is the lost world,” Goitia said. He has already held talks with two private equity investors and is setting up meetings with like-minded wildcatters – smaller, independent drillers who risk their own capital to drill unproven wells – exploring ways to enter the South American country. Less than a month after the U.S. incursion into Caracas to capture Venezuelan President Nicolas Maduro, visions of a new oil rush are galvanizing the industry in Houston, as U.S. President Donald Trump seeks $100 billion in investment to rebuild the country’s dilapidated oil industry. That excitement is also percolating at much larger firms. Jeff Miller, the CEO of Houston-based oil services giant Halliburton told analysts on a Wednesday earnings call that his phone was “ringing off the hook” with Venezuela inquiries. The company exited Venezuela in 2020 following U.S. sanctions, but it’s now working on securing licenses that would allow it to return, he said.
Miller participated in a January meeting at the White House and told Trump that Halliburton was “very interested” in returning and that he had lived in Venezuela for four years and in part raised his children there. He told investors this week that there “are opportunities for us sooner rather than later.”
“There is a lot of initial excitement – everyone wants to be on the move,” said Francisco Monaldi, director of the Latin America Energy Program at Rice University’s Baker Institute in Houston. Monaldi said the Department of Energy has organized meetings with wildcatters, including Continental Resources founder Harold Hamm and Hilcorp Energy founder Jeff Hildebrand. The billionaire oil tycoons also attended the January 9 Venezuela roundtable with Trump at the White House. Continental and Hilcorp did not immediately reply to emailed requests for comment on the status of any talks or proposals.
MEETINGS EXTEND TO NEW YORK, DENVER
Ali Moshiri, Chevron’s former head for Africa and Latin America who is now CEO of Houston-based Amos Global Energy, has been preparing for years to enter Venezuela and has been in early-stage talks to raise as much as $2 billion. He told Reuters he has had recent meetings with potential investors in Houston and New York.
Enthusiasm for a quick entry has been tempered by the fact that nobody knows the rules for investing and operating in Venezuela under U.S. supervision. Some companies want to see firmer plans from the U.S. for an eventual transition to democracy in Venezuela that would provide a more stable political environment for their long-term investments.
“There are two groups of companies. Some of them are cautious and waiting for reforms, and even for a no-risk scenario to go there, and others are acting as if this is another ‘gold rush’,” Moshiri said. “Those who have been involved with Venezuela for a long time are trying to find a middle ground.” J.P. Hanson, the global head of investment bank Houlihan Lokey’s oil and gas group, said lots of conversations about Venezuela were happening, but public and private investors still faced a significant amount of uncertainty.
“They will need a clear opportunity to own assets, know what they are investing in and know that you can protect your assets,” he said on the sidelines of an industry event in Houston on Thursday. Venezuela’s National Assembly began discussing a sweeping reform to its hydrocarbons law last week that would allow foreign and local companies to operate oilfields on their own through a new contract model. The changes, pending approval, could be an initial step toward allowing wildcatters and independents to enter the country with updated contracts that allow for increased flexibility over the current joint venture model.
THE DENVER CONNECTION
Denver, Colorado, meanwhile, is also emerging as a hub of Venezuela-related activity after several companies based there participated in the Trump roundtable. Among them was Raisa Energy, which acquires non-operated stakes in energy assets and has a Venezuelan CEO; Tallgrass Energy, a midstream company with pipeline and terminal assets, and Aspect Holdings.
American oil companies could help restore Venezuelan production and prosperity and are prepared to begin “real work, quickly,” said Alex Cranberg, Aspect’s chairman. “The prize is enormous, but it requires durable contracts and long-term confidence-building,” he said in an emailed response to questions from Reuters, referring to the potential for development in the country’s prolific Orinoco heavy crude belt. He also said there is potential for onshore and offshore wildcat exploration, as modern technology could unlock oil and gas resources that are not reflected in current reserve estimates.
“We need contractual and security arrangements that are realistic and dependable. We need technical data and lots of it,” Cranberg continued.
Trump has told executives they would be “dealing with us directly” and not with Venezuela, but it is unclear which U.S. agencies would do what, who would handle licenses and approve deals – or when U.S. sanctions that prohibit facilitating Venezuelan oil trade might be lifted.
Any U.S. company wanting to work in Venezuela’s oil sector currently needs a license or sanctions waiver from the U.S. Treasury Department, and international banks cannot work there either under current sanctions. Many Venezuelan laws would also need changing before companies could invest, lawyers have said.
PRESSURE FROM WASHINGTON TO GET MOVING
Trump and his Energy Secretary Chris Wright, meanwhile, want the industry to get moving.
“They are in a hurry, because the president told Wright to be in a hurry, and Wright, of course, is trying to deliver,” Monaldi said. Realistically, though, most quick gains in Venezuelan oil production would likely come from operations run by U.S. oil major Chevron – the only U.S. energy producer with a license to operate there. There is a similar buzz inside PDVSA offices in Caracas and operational sites across the country, company sources, who requested anonymity, said. The mood there has changed rapidly since the company said it was progressing in negotiations with the U.S. Some company executives are rushing to arrange meetings with foreign oil executives about production, exports, power supply and business opportunities, the sources said.
There has been a flurry of interest from companies studying potential opportunities in Venezuela, said Emil Calles Lossada, CEO of Caracas-based Venergy Global, which collects commercial intelligence for companies wanting to invest. Current sanctions are holding most of them back, however, so easing the restrictions and making legal reforms in the South American country are needed, he added.
Back in Houston, Goitia estimates returns of at least 20% when the two systems are fully placed into service. He anticipates significant potential for higher returns if a larger company has an interest in acquiring them after a few years.
In a nearby office, meanwhile, an aspiring energy developer looking for investors laid out a different pitch: $70 million a year to revive abandoned oil wells in eastern Venezuela. He reckoned he could turn it into an $800 million windfall.
He’s trying to raise the money from Texas wildcatters and wants to rework existing wells that need an overhaul. The infrastructure, even if run down, should be good enough, and he says the math works out. All he needs is to ramp up to 50,000 barrels per day, which could take about seven months.
Texas dreams are big, and Venezuela is once again as hot as the mythical El Dorado.
(Reporting by Arathy Somasekhar and Nathan Crooks in Houston, with additional reporting by Liz Hampton and Marianna Parraga; Editing by Simon Webb and Anna Driver)
