President Trump announced this weekend that the United States had secured majority control over more than 65 billion barrels of Venezuela’s proven oil reserves through a partnership with private business.
That is a big number. But it is not the number the oil and gas industry will be focused on.
Venezuela already has the largest proven oil reserves in the world. It produces only about 1.25 million barrels a day. That gap tells you a lot about what comes next.
Sixty-five billion barrels of reserves is not 65 billion barrels of supply.
The oil is there. The harder question is what it takes to actually produce it.
Existing wells may need work. Infrastructure needs investment. Equipment and people have to move into the country. Companies have to decide the economics work. And before anyone commits billions of dollars, they have to be comfortable that the agreements they sign today will still be enforceable years from now.
That is the part experts in this industry will be watching.
My firm works with oil and gas companies on the agreements behind development. Most people will never read those agreements, but they matter. Companies need to understand what they own, what they control, what they are obligated to spend and what protections they have if circumstances change.
Boards do not invest billions based on an announcement. They invest when they have enough confidence in the contracts and the economics to put capital at risk.
Contracts drive capital. Capital drives production.
And none of that happens overnight.
There may be opportunities to improve production from existing Venezuelan fields relatively quickly. But in the oil business, relatively quickly can still mean years. Larger redevelopment projects can take much longer.
That matters when talking about oil prices too.
Markets can react to an announcement immediately because markets react to expectations. But if the question is whether this will have a lasting effect on oil prices, actual production matters. More barrels reaching the global market means more supply and, all else being equal, downward pressure on prices.
But first you have to get the barrels to market.
For perspective, the world consumes roughly 100 million barrels of oil every day. The United States alone consumes around 20 million barrels per day. Roughly 20 million barrels per day move through the Strait of Hormuz.
So the important question is not simply how many barrels Venezuela has underground. We already know it has an enormous amount of oil. The question is how much additional oil can actually be produced, how much investment that will require, and how long it will take.
Oil companies are accustomed to evaluating political, legal and commercial risk around the world. Venezuela is obviously not the first place where those risks have existed. Companies deal with them through contracts, economics and legal protections. If they can get comfortable with those things, capital can move. If they cannot, it does not.
That is why the agreements behind this announcement may ultimately be more important than the headline number.
If those agreements create enough confidence for significant private capital to move into Venezuela, this could become a very significant development for Venezuela, U.S. companies and the global energy market.
But in a country as chaotic as Venezuela, with uncertainty as to the future resilience of its government and institutions and reports of consensus opposition to the agreement, that is a big ‘if’. In short, we are not there yet.
There are a lot of steps between announcing access to reserves and producing oil from those reserves. This seems to be a first step, but not much else.
