US nears Venezuelan oil field deal

The United States is close to finalising a deal that would give it long-term access to Venezuelan crude reserves, Reuters sources say. The agreement, reportedly in the final stages of negotiation, would allow the US government to secure a group of Venezuelan oilfields for development by American companies, with the resulting supply guaranteed for the United States.

Deal Structure

Insiders say the contract could be signed and made public soon. A "lease" is being considered as the legal model to make the deal work, with a further auction or tender to allocate each field among US producers. The White House has referred questions to the US Department of Energy, while Venezuela’s oil ministry, state oil company PDVSA and the Energy Department have not yet replied to requests for comment. Venezuelan oil minister Paula Henao could not be reached.

Field Portfolio

A list of 17 fields in negotiation, seen by Reuters, includes green fields in the vast Orinoco Belt and mature areas in Lake Maracaibo. Some of these are currently operated by a small Chinese firm whose contract was signed during the administration of former President Nicolas Maduro. The fields span both undeveloped and mature assets, offering a mix of exploration and production opportunities.

Legal and Political Context

Venezuela’s current hydrocarbons regulation does not include acreage leases for oil areas, and the constitution reserves the industry’s core activities to the state. Recently reformed oil legislation allows oilfield operation through joint ventures and production-sharing contracts, but the government has for decades prevented foreign producers from booking the country’s oil reserves. Experts say the prospective deal could raise constitutional questions and face legal challenges.

Caracas is considering leaving the OPEC oil production group as it strengthens ties with the United States, Bloomberg reported on Thursday. Venezuela, which joined OPEC as a founding member in 1960, has not met OPEC quotas for years as its state-run oil industry suffered from neglect and corruption. Washington has long been at odds with OPEC for its influence on oil prices.

Strategic Implications

Since the US captured and removed former President Nicolas Maduro from power in January, Washington has been trying to secure a stable flow of Venezuelan crude for US refineries while promoting American investment into the country’s deteriorated energy industry, which currently produces some 1.25 million barrels per day of crude.

The Trump administration is under pressure ahead of November’s midterm elections over rising petrol prices, which could be eased through cheaper oil supplies and expanded output. The US has also been looking for solutions to replenish its Strategic Petroleum Reserve, the oil stockpile it keeps for emergencies, including the possibility of crude swaps with US producers.

Funding shortages and ongoing maintenance at the reserve have limited the administration’s efforts to refill it after the US tapped it following Russia’s invasion of Ukraine in 2022 and then again after the war on Iran was launched in February.