Trump's Trillion-Dollar Oil Play A Trap For Big Oil
OilPrice.com · Simon Watkins ·
Trump's $100 billion-plus Venezuela oil ambitions face major obstacles, including sanctions uncertainty, financing difficulties, infrastructure costs and the country's history of expropriation.
U.S. President Donald Trump’s core vision of the future of global oil and gas is to have as much of that supply as possible coming from his self-proclaimed ‘Americas’ region, which is directly in the U.S.’s sphere of influence. Venezuela is one of the key countries from which this increased production is designated to flow, which is why Washington is focusing so much of its efforts on encouraging heavy investment from American oil and gas giants into the country. It is in this context that very recent changes to Venezuela’s ‘Organic Hydrocarbons Law’ should be seen. But are they ultimately likely to achieve their objectives?
The details of these multiple changes to the law were definitively laid out over the past couple of weeks during and after the ‘Venezuela Global Investment Forum 2026’, which was part of a massive push by state oil firm Petróleos de Venezuela, S.A. (PDVSA) to lock in 105 new oil contracts by the end of this year. This was the first time the new government -- following the U.S. removal of former president Nicolás Maduro in January -- had delineated the exact tiered fiscal rates on a major international stage to tempt in global capital, despite the broad framework being technically written in January and clarified with fiscal regulations in July. In broad terms, the message presented by Venezuela’s vice minister of commercial policy, Ricardo Gomez, during and after the investment forum has been that the majority state control model for the oil and gas sector established under former president Hugo Chávez, and continued by Maduro, is over and that company operators can now have exclusive control over assets in the sector. Related: How Iran Just Broke the U.S. Oil Shield In Saudi Arabia Yet Again
A crucial addition here is that Venezuela’s amended Organic Hydrocarbons Law has created new investment opportunities across its oil and gas sector, offering international companies varied contract options for developing heavy-oil reserves, mature fields, offshore gas resources and refining infrastructure. The new legal framework allows international investors to choose between hydrocarbon productive participation contracts, restructured joint ventures with state-owned PDVSA, and direct contracts covering infrastructure and oilfield services. For example, perhaps the most direct investment route for foreign firms into the country’s oil and gas sector is offered by the ‘hydrocarbon productive participation contracts’ (CPPHs). In this structure, a company incorporated in Venezuela operates a designated area at its own cost and risk for 25 years and, with ministerial approval, it will also have the legal right to sell its own share of the produced oil and gas directly to international buyers, completely bypassing PDVSA’s trading desks. This is a huge change from the Chávez/Maduro model, under which only PDVSA or another state-controlled entity had the legal monopoly to market and sell the crude. Under that structure, private partners were forced to let PDVSA handle the sales and then wait to be paid their share of the revenues -- a system that frequently led to foreign firms being trapped by PDVSA’s cash-flow crises, defaults, and the impact of primary US sanctions. This new CPPH model has already been used by Italy’s Eni, which transferred its Junín-5 heavy-oil field (with 35 billion barrels of certified oil in place) to this contract type in September, moving from a minority joint venture position to become the asset’s exclusive operator.
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