Chevron speeds ahead in Venezuela while Exxon urges caution with a ‘little pinch of salt’
· Fortune
While Chevron is investing $7 billion in Venezuela to double its oil output within five years, ExxonMobil CEO Darren Woods again urged “caution” and said a lot of reforms are still required before any major entry into the country is decided.
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Following reports a month ago that Exxon was close to inking a memorandum of understanding to explore investing in Venezuela oilfields, Woods warned against over “exuberance” and said to take such reports with a “little pinch of salt.” But he said he does believe Exxon “ultimately will have a role” in due time.
Back in January, Woods infamously said at the White House that Venezuela was “uninvestible” and—even though he was speaking about that moment in time—it publicly rubbed President Donald Trump the wrong way. “I didn’t like their response. They’re playing too cute,” Trump later said of Exxon, following the U.S. military ouster of former Venezuelan leader Nicolás Maduro.
Speaking during Exxon’s third-quarter earnings call on Friday, Woods said his rhetoric hasn’t changed since January. After all, Exxon has seen its assets nationalized twice in Venezuela, most recently in 2007. Chevron, on the other hand, worked out a deal with the Maduro regime and never left the country, still operating as the top private producer in the country.
“It’s going to require some substantial changes to the way things have historically been done in Venezuela. There is progress being made on those areas,” Wood said, citing changes to the fiscal and legal frameworks. “A number of things are in progress, but there’s a way to go.
“We’re going to make sure that before we commit that those are in place, and we have confidence that we have a viable project that’s sustainable and will generate the returns required to compete in our portfolio,” he continued. “I expect that to take time. We’re working our way through it. We’re not in a rush. We think that opportunity is going to be there for a while, and so we’re trying to be methodical and thorough.”
Woods emphasized that successfully operating in Venezuela requires scale and that only a few companies have the resources to succeed, including Exxon.
Beyond Exxon
Exxon’s reluctance hasn’t stopped Chevron and other companies from proceeding. Last month, the top private oil and gas producer in the U.S., Continental Resources—founded by billionaire Trump ally Harold Hamm—signed a memorandum of understanding with Venezuelan state oil company PDVSA to develop a major area in the prolific Orinoco Belt.
The Trump administration is moving quickly too. In late August, Trump announced what he called the “biggest oil deal in world history.” The U.S. would control more than 65 billion barrels of proven oil reserves in 17 oilfields in Venezuela. Although many of the details remain unknown, the agreement would operate through the second-largest private Venezuelan oil producer, North American Blue Energy Partners (NABEP). The U.S. Department of Defense would own a 35% stake in NABEP and control a majority of the oil production.
While most of Venezuela’s oil industry is onshore, others, such as BP and Shell, plan to invest in offshore Venezuelan gas fields near Trinidad and Tobago.
Chevron’s new deal in Venezuela includes doubling its production from 300,000 barrels of oil daily to 600,000 barrels by 2031. Thus far this year, Chevron has ramped its volumes 20% from 250,000 barrels daily. Overall, Venezuela has hiked its output from less than 1 million barrels daily to more than 1.2 million barrels in October.
For context, the country—with the world’s largest proven oil reserves on paper—peaked decades ago with an output of nearly 4 million barrels daily and has since seen its oil industry fall into disrepair.
But Chevron CEO Mike Wirth made it clear his company is the one best positioned to move more quickly.
“As the only incumbent on the ground, we definitely have an advantage in terms of our understanding of the geology, the infrastructure,” Wirth said.
He emphasized that Chevron’s bet isn’t particularly risky either because it will be “self-funding” after initial the investments.
“It will be recovered quickly. It’s a factory-type drilling program,” Wirth said. “And we can manage the pace of activity up or down as market conditions call for it. It’s a very different set of market dynamics than we’ve historically had in Venezuela.”
The political, legal, and financial environments have all changed significantly since the Trump administration’s military intervention, he said. The contractual terms are “much more competitive,” including clauses regarding political stability and international arbitration comparable to other countries where Chevron operates.
Chevron, not PDVSA, will control the flow of the oil it produces, and the royalties and taxes it pays the government. It’s a two-way street, and being a good steward and job creator within Venezuela will reap its own rewards, he said.
“To me, the best way to manage those risks is to have support of the people in the country and that leads to an environment where you can resolve any differences that may emerge,” Wirth said.
This story was originally featured on Fortune.com