‘The time is now’: Investors gear up to enter Venezuela despite enormous risks

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London — In a glittering ballroom in central London, around 200 people in the energy industry gathered to discuss a proposition that, a mere eight months ago, seemed unthinkable: investing in Venezuelan oil.
“The time is now,” Greig Gilbert, chief executive of Apertura Energy, an investment firm, told the crowd on Thursday evening at The Langham hotel.

Gilbert’s company hopes to make big-ticket investments in Venezuela’s dilapidated oil sector. Apertura Energy changed its name and overhauled its strategy just months after the United States removed then-President Nicolás Maduro in January — laying the groundwork for foreign investors to move into an industry long dominated by a state-run oil company.

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But there are huge risks for firms attempting to cash in on the world’s largest proven oil reserves. Event speakers on Thursday acknowledged the roadblocks facing foreign companies in Venezuela, including decaying infrastructure, political uncertainty and the instability wrought by June’s devastating earthquake.

Still, Gilbert, recognizing the risks, urged his audience to seize the day. “There is a window opening. There is an opportunity right now, and we can’t afford to miss that.”

A handful of foreign oil companies and investment firms are moving to invest or expand their existing operations in Venezuela under acting President Delcy Rodríguez, who, despite serving as Maduro’s vice president, appears friendly to foreign interests.

Reforms under her government have dropped a longstanding requirement that PDVSA, the country’s state-run oil firm, holds a majority stake in joint projects.

“Private companies can now operate fields directly, hold bigger stakes, and keep more of the profit,” Claire Jungman, director of maritime risk and intelligence at energy data firm Vortexa, told CNN.

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Since January, Washington has pounced on the opportunity presented by Venezuela’s 300 billion barrels of crude, unwinding some sanctions to make it easier for US companies to sell and export Caracas’ barrels.

Easing sanctions appears to have worked. Last month, Venezuela exported 28 million barrels of crude — up almost 69% from the same month last year, according to Vortexa.

And more than half of Venezuela’s barrels are destined for the United States, where refineries in the Gulf are capable of processing its heavy, viscous form of crude, said Jungman. Before January, nearly three-quarters of Venezuela’s crude exports headed to China, with the United States a distant second.

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The memory of asset seizures will be hard to shake. Oil companies also invest for the long term, and — while Rodriguez’s government is welcoming foreign firms now — a change of leadership could quickly change that picture.

And enormous sums of money are needed to upgrade Venezuela’s decaying infrastructure after years of underinvestment and little maintenance.

Homayoun Falakshahi, head of crude oil analysis at Kpler, said that new projects likely won’t see results for another five years and that the costs will be colossal.

“We’re talking something between, I would say, 50 (billion) and 100 billion (dollars) of investment over the next five to 10 years,” he told CNN. “So it has to be huge.”

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Seven months after the U.S. deposed strongman Nicolás Maduro, Big Oil has yet to make any big moves in Venezuela.

ExxonMobil, Chevron and other major oil companies are fighting for a small number of the country’s most attractive drilling spots, but some of the talks with Venezuelan leaders recently hit an impasse, according to people familiar with the negotiations.

President Trump and his lieutenants had high hopes that big U.S. oil companies would quickly sign investment deals to kick-start production in Venezuela, home to some of the world’s largest reserves. They see the country’s rising oil exports as a boon to U.S. supplies while Iran hobbles shipping lanes in the Middle East that typically carry 20% of the world’s oil and gas.

The administration is also putting pressure on interim President Delcy Rodriguez to boost Venezuela’s production quickly—before the end of Trump’s second term.

Among the issues that have handicapped any big deals: Major U.S. oil producers are interested in many of the same prized assets, including fields in eastern Venezuela’s Orinoco Belt and the northeastern state of Monagas—and they want to secure the most favorable fiscal and regulatory terms possible.

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The negotiations are largely being led by state-run Petróleos de Venezuela, which is holding separate meetings with companies and making private offerings. Some of the American companies, which are more accustomed to public bidding processes, have requested U.S. officials intervene. So far, the administration has let the process play out without choosing any winners.

Some U.S. executives worry their long-term investments could be undermined by political instability in the future and say PdVSA isn’t in a position to assuage those fears, the people familiar with the talks say. In some cases, debt repayments, tied to the expropriation of their assets two decades ago under Hugo Chávez, have yet to be resolved.

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Despite their reluctance to move quickly in Venezuela, many executives say the potential prizes are huge, particularly for companies that typically drill in places that can pump oil for decades.

Among the sites Exxon, Chevron and others are studying most closely is the Carabobo oil region in the Orinoco Belt, the people said. The area has massive reserves of heavy, viscous crude that U.S. refineries greatly prefer over other kinds of oil.

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