‘The time is now’: Investors gear up to enter Venezuela despite enormous risks
London (CNN) — 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.
Apertura was among the flock of investors, trading houses, and oil and gas companies at the event. It was a taster for Venezuela Energy Week, a much bigger conference scheduled for October in Caracas.
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.”
The promise
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.
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.
India is another huge buyer, Jungman said, accounting for about a quarter of exports, while European countries like Spain and the Netherlands are also in the mix.
On Monday, President Donald Trump said his administration has collected more than $13 billion from selling Venezuelan oil since Maduro’s capture.
The US government has said it will hold the proceeds from the sale of Venezuelan oil in US-controlled accounts in a “custodial” capacity and intends to return them to Venezuela. Democrats in Congress have pushed for more transparency over this process.
The problem
In the hours following Maduro’s ouster, Trump painted a simplistic picture for energy companies: Go in, spend big and fix the crumbling infrastructure.
The reality will be far more arduous. Years of punishing international sanctions and economic crises have hollowed out Venezuela’s once-thriving oil industry.
“It’s uninvestable,” ExxonMobil CEO Darren Woods declared during a January meeting of top oil executives in the White House. The US oil giant was among a handful of foreign firms expelled from Venezuela in 2007 after the government expropriated its assets.
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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