(Bloomberg) — The US is in talks with Chevron Corp., other crude producers and the world\u2019s biggest oilfield service providers about a plan to quickly revive output in Venezuela at a fraction of the estimated $100 billion cost for a complete rebuilding.<\/p>\n
Oilfield contractors such as SLB Ltd., Baker Hughes Co. and Halliburton Co. would focus their initial efforts on repairing or replacing damaged or outdated equipment and refreshing older drilling sites, according to senior administration officials who asked not to be identified discussing internal plans.<\/p>\n
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The idea is that with limited investment, Venezuela could boost production by several hundred thousand barrels over the short term, the people said.<\/p>\n
The go-fast approach is designed to fulfill the Trump administration\u2019s goal of swiftly increasing crude flows in the wake of the US capture of Venezuelan strongman Nicolas Maduro, generating cash that could be used to help pay for rebuilding the country. Longer term, President Donald Trump\u2019s goal remains an industry revival that would bring output closer to the country\u2019s 1970 peak of roughly 3.75 million barrels per day from current production of less than 1 million.<\/p>\n
While analysts say achieving that bigger prize will take at least a decade, there\u2019s plenty of production gains to be had in the near term.<\/p>\n
\u201cThere\u2019s some low-hanging fruit that you could probably squeeze some life out of once again,\u201d said Tom Liskey, who heads up Latin American research at industry consultant Enverus.<\/p>\n
A representative for Halliburton said its goal in Venezuela \u201cis to achieve quick wins and generate immediate production recovery.\u201d Representatives for SLB didn\u2019t immediately respond to messages seeking comment. Baker Hughes declined to comment.<\/p>\n
A more immediate upswing in Venezuelan crude flows would align with several priorities for Trump, who has prized American energy dominance both as a source of leverage globally and political capital at home, where he is seeking to allay cost-of-living concerns ahead of critical midterm elections in November. A supply boost from Venezuela, however modest, is seen as not only helping to check crude and gasoline prices, but also expanding the US\u2019s leeway to move against Iran without jolting the market.<\/p>\n
Venezuelan crude sales will make money for both countries and \u201cbring down oil prices even further,\u201d Trump told reporters on Air Force One on Thursday. \u201cWe are drilling more oil than at any time in the history of our country, by far. If you add Venezuela to it, it\u2019s a tremendous part of the market.\u201d<\/p>\n
Bringing state-of-the-art US equipment and techniques to Venezuela \u2014 where the oil industry has been throttled by years of sanctions \u2014 can revitalize existing wells and bring new production online within months, the Trump administration officials said. Some analysts have underestimated how dramatically operations could improve under free-flowing, regular relations, one of the people said.<\/p>\n
Even so, the country\u2019s existing infrastructure has been plagued by decades of underinvestment and neglect \u2014 including in once-prolific areas in the east and around Lake Maracaibo where oil was first discovered a century ago. Environmental liabilities from years of oil spills and jury-rigged installations are another challenge.<\/p>\n
If the Trump administration gives the green light for other US contractors to join rival SLB \u2014 the largest service company that\u2019s remained working in the country \u2014 in the initial phases, they are likely to employ tried-and-true equipment that will rehab old wells, repair artificial lift pumps and install electric turbines at remote fields.<\/p>\n
\u201cThe short term is workovers of PDVSA\u2019s inventory,\u201d David Goldwyn, chairman of the Energy Advisory Group, said Thursday in an Atlantic Council event, referring to Venezuela\u2019s state-owned oil company. \u201cIt\u2019s not technically difficult, doesn\u2019t require a huge amount of capital.\u201d<\/p>\n
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Chevron will initially focus on \u201cleveraging what\u2019s on the ground\u201d already in Venezuela, Vice Chairman Mark Nelson said at a White House meeting Jan. 9. The company plans to increase production from its joint ventures with PDVSA by 50% within the next 18 to 24 months, he said. Currently the JVs produce about 240,000 barrels of oil per day.<\/p>\n
The company said in a statement that it stands ready to help Venezuela \u201cbuild a better future while strengthening US energy and regional security.\u201d<\/p>\n
Longer term, US authorities \u2014 and oil companies in talks with the administration about entering Venezuela \u2014 see opportunities in drilling new wells and even tapping new underground reservoirs. US Treasury Department officials are weighing a surge of applications from crude producers, oilfield service companies and other firms seeking licenses to enter Venezuela, the administration officials said.<\/p>\n
The enthusiasm remains tempered by concerns about political stability and safety for workers in the country. Some industry leaders have stressed they need financial and security guarantees from the US \u2014 an option Energy Secretary Chris Wright appeared to foreclose in a Thursday interview with Bloomberg TV.<\/p>\n
Photographer: Chris J. Ratcliffe\/Bloomberg <\/p>\n
Despite having to write down losses in the past, US service providers also are buzzing about the opportunity to return to a country that boasts one of the world\u2019s biggest oil reserves.<\/p>\n
\u201cWe can mobilize in weeks,\u201d Halliburton Chief Executive Officer Jeff Miller told investors recently. \u201cWe can move fairly quickly as opportunities arise.\u201d<\/p>\n
Baker Hughes has the largest installed base of so-called rotating and artificial lift equipment \u2014 machinery that speeds up crude production \u2014 in Venezuela, Chief Executive Officer Lorenzo Simonelli said recently. The infrastructure is key for production in the country, where crude is located in remote areas that don\u2019t always have access to electricity.<\/p>\n
And Weatherford has called Venezuela a massive opportunity.<\/p>\n
\u201cIt\u2019s the most interesting development that\u2019s happened in our industry in a long period of time,\u201d CEO Girish Saligram told investors this month at a conference in Miami.<\/p>\n
Venezuela could be particularly attractive for servicers, which have suffered from a slowdown in US shale growth in recent years.<\/p>\n
When Venezuelan oil production was at about 3 million barrels a day, the country was running roughly 75 rigs, according to Citigroup. Returning to that pace of activity would mean a market of $10 billion in drilling and completion spending. And the artificial lift and chemicals market could be another $750 million a year, the bank said.<\/p>\n
\u201cVenezuela, with all that we are seeing, could be heading back to 1.5 million barrels a day,\u201d said Luisa Palacios, former chairwoman of Citgo Petroleum Corp. \u201cThat obviously is not enough, but that gets you to stabilization.\u201d<\/p>\n
–With assistance from Dave Merrill, Emma Sanchez, Kevin Crowley and Patricia Garip.<\/p>\n
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\u00a92026 Bloomberg L.P.<\/p>\n","protected":false},"excerpt":{"rendered":"(Bloomberg) — The US is in talks with Chevron Corp., other crude producers and the world\u2019s biggest oilfield…\n","protected":false},"author":3,"featured_media":540208,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[238519,3638,64,69,79,18904,67,132,68,32322],"class_list":{"0":"post-540207","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-baker-hughes","9":"tag-bloomberg","10":"tag-business","11":"tag-donald-trump","12":"tag-economy","13":"tag-production","14":"tag-united-states","15":"tag-unitedstates","16":"tag-us","17":"tag-venezuela"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115951939429032853","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/540207","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=540207"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/540207\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/540208"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=540207"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=540207"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=540207"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}