The stocks of the world’s largest energy operators gained ground Monday as traders priced in a potential new market for the companies following the United States’ capture of Venezuelan leader Nicolás Maduro.
Shares in US oil majors ExxonMobil (XOM) and ConocoPhillips (COP) both picked up 2% and 3%, respectively on Monday, while Chevron (CVX), the only US oil company left operating in Venezuela, rallied by around 5%. Oil field services giants Baker Hughes (BKR), Schlumberger (SCL.SG), and Halliburton (HAL) did much the same, gaining more than 5% each.
But for the oil majors and their compatriot oil field services operators, Venezuela is unlikely to be a story of immediate barrels and instead one of a slow rebuilding of infrastructure largely left to crumble for more than two decades.
“Any meaningful supply increase [of Venezuelan oil] will be gradual, require political stability, lifting of US sanctions and external investment but would add to a market where oil price has averaged down for three years,” Jefferies equity analyst Mark Wilson, who focuses on the energy market, wrote in a note to clients.
Leading up to the turn of the century and the rise of leftist leader Hugo Chavez, Venezuela was an oil powerhouse on the global stage. The South American country sits on the world’s largest proved reserves of crude oil, estimated at more than 300 billion barrels’ worth. In the 1990s and early 2000s, Venezuela was exporting more than 3 million barrels of crude oil per day (bpd).
Twenty years later, exports have dipped below 1 million bpd, falling even further as sanctions from the US Treasury Department on oil tankers have made Venezuelan crude even less attractive to global buyers. Meanwhile, the US exported more than 4 million bpd in October.
In the two decades separating Venezuela’s export highs from its current levels, the country’s oil industry has been beaten down by chronic underinvestment, corruption, and a state control model that has largely let infrastructure rot.
In Venezuela’s oil fields, rigs have fallen apart and been robbed by thieves, while spills go unmanaged. At the country’s ports, infrastructure has fallen into such disrepair that it can take up to five days to load a supertanker where once it took only one day, according to Bloomberg.
Venezuela has also suffered a large-scale “brain drain,” as a once vibrant and specialized oil workforce has spent the past decade leaving the country for other, more stable and higher-paying markets such as Houston and the Middle East.
