The U.S.-Venezuela oil deal giving the U.S. government control over a potential 65 billion barrels of proven reserves announced by both governments on August 28 is a highly complex arrangement that immediately sparked a great deal of speculation regarding its motives. Much of the speculation flying around about the agreement - reportedly negotiated by Secretary of State Marco Rubio and Secretary of War Pete Hegseth with Venezuelan President Delcy Rodriguez - is unrealistic, reflecting a lack of understanding about the motivations behind the deal and what it really takes to bring a major resource play into production in the modern world.
What the U.S.-Venezuela Deal Is Not About
First, let’s specify what this deal is not about. Trump’s deal with the Rodriguez government is not about today. It is not about near-term impacts to lower oil and gasoline prices. It is not about replacing the millions of barrels of crude coming in from an increasingly China-friendly Canada each day with immediate supplies from a more friendly Venezuelan government. Oil prices are not immediately going to plummet to $60 per barrel as a result of this deal, nor are gasoline prices at the pump going to fall to levels seen prior to March 1 next week.
A high percentage of the acreage involved in the deal is greenfield acreage that will likely take 7 to 10 years to bring into production. Not 7 to 10 days – 7 to 10 years. Much of the remaining acreage consists of brownfield developments that were allowed to dilapidate into disrepair under the governments of Hugo Chavez and Nicolas Maduro. These assets will take time and billions of dollars in capital investments to turn into first or enhanced production.
