US President Donald Trump announced on 28 August that the US and Venezuela have reached an agreement that will give the US access to an estimated 65 billion bbl of recoverable oil in the South American nation.

The announcement, made by Trump on social media, was later confirmed by Venezuelan Interim President Delcy Rodríguez.

The Trump administration said in a release that the US has partnered with privately held North American Blue Energy Partners (NABEP), which has granted the US Department of War a 35% equity stake in its parent company. Under the agreement, the US government will hold veto power over appointments to NABEP’s board of directors, a majority of whose members must now be US citizens.

The Barbados-based company is the second-largest oil producer in Venezuela after state-owned Petróleos de Venezuela S.A. (PDVSA). Most of the fields it is set to assume control of were previously operated or controlled by Russian and Chinese companies, or by firms affiliated with former Venezuelan presidents Hugo Chávez, who died in office in 2013, and Nicolás Maduro, who was arrested by US forces on drug-trafficking charges during a pre-dawn raid on 3 January.

According to the White House release, NABEP plans to invest up to $100 billion in new oil infrastructure projects in Venezuela and is expected to generate $200 billion in royalty and tax payments to the Venezuelan government over the next 25 years. The administration said the US government will oversee those payments to help ensure the proceeds are used in the interests of Venezuelan citizens.

NABEP has also granted the US Department of State the option to purchase 20% of its oil production at cost, with those volumes earmarked for replenishing the US Strategic Petroleum Reserve (SPR). The SPR has been significantly drawn down since the outbreak of the US-Israeli conflict with Iran more than 6 months ago. Under the agreement, the US government also holds a right of first refusal on the remaining 80% of NABEP’s production.

The Trump administration also said Venezuelan crude produced under the agreement will be processed at US refineries, while US drilling rigs and upstream infrastructure will be used to help develop the country’s oil resources.

In a televised address, Rodríguez said the agreement will remain in effect for 25 years and help revitalize Venezuela’s oil industry. However, the Trump administration has highlighted that NABEP has been given a 100-year concession to operate 17 fields.

Rodríguez added that the venture will target a production rate of 1.5 million B/D of crude oil. She also said the agreement would direct $19 for every barrel produced to the Venezuelan government.

Gradual Production Increases Expected

Commenting on the deal, Rystad Energy said the deal holds great potential to change the course of Venezuela’s long-term production outlook, but that the recovery will be gradual and involve political, contractual, and execution risks.

“The challenge facing Venezuela has always been whether the right conditions would emerge to develop the country’s resources. This agreement improves those conditions, with more competitive fiscal terms and a clearer pathway for international capital,” said Radhika Bansal, senior vice president of Latin America oil and gas for Rystad. “However, investors looking at multi-decade projects need confidence that a contract signed today will be honored by whoever governs Venezuela in 10 or 20 years.”

Rystad Energy noted that the agreement includes nine brownfield projects and eight greenfield developments. The brownfields represent the quickest route to increasing production because they already have wells, facilities, and supporting infrastructure in place. The Norwegian research firm estimates output from the brownfield assets could rise to approximately 157,000 B/D by next year and reach about 740,000 B/D in the early to mid-2030s. When greenfield developments are included, Venezuelan crude production could climb to 2.3 million B/D by 2035 and exceed 3 million B/D by 2050.

Venezuelan crude production peaked at more than 3 million B/D in 1998 before entering a prolonged decline following Chávez’s rise to power the following year and his consolidation of control over state oil company PDVSA.

The decline has been attributed to a political purge within PDVSA that cost the company much of its technical expertise. Additionally, a significant share of PDVSA’s revenue was directed toward social programs rather than reinvestment in oil field development and maintenance.

Venezuela also restructured contracts with international oil companies to give PDVSA majority ownership of projects, leading many foreign partners, including several US-based firms, to exit the country.

Separate from its agreement with the US government, Venezuela is expected to sign additional exploration and production deals with international oil companies, including Chevron. The supermajor is the only US producer to have maintained a presence in Venezuela after PDVSA assumed majority control of foreign-led projects.

According to the US Energy Information Administration, Venezuela holds an estimated 303 billion bbl of proved oil reserves, representing about 17% of the global total. Most of the country’s reserves are heavy oil in the Orinoco Belt.

Despite holding what are believed to be the world’s largest reserves, underinvestment and US sanctions have limited Venezuela’s output to about 1% of world oil production in recent years.