Reluctant Exxon takes first step into Trump’s Venezuela oil push

ExxonMobil (NYSE:XOM) has signed a non-binding memorandum of understanding with Venezuela’s state oil company PDVSA to evaluate upstream opportunities, its first formal step towards a return to the country 19 years after former president Hugo Chavez’s government expropriated its projects.

The memorandum, signed in Caracas on November 9, covers both producing fields and new projects focused on heavy and extra-heavy crude, mainly in the Orinoco Belt, according to the Venezuelan government. Exxon did not say which areas it was evaluating, and no investment figure, production target or timetable was published.

“This memorandum is a meaningful first step, but any future investment would require stable policies, clear regulations, strong investment protections and competitive returns,” the company said in a statement.

At a ceremony led by acting President Delcy Rodriguez, Exxon’s upstream president Dan Ammann described the agreement as an important step in a process the company hopes will lead to its return. "We welcome you back," Rodriguez said, adding that the agreement covers "both green and brown fields with significant reserves, billions of barrels of reserves." Hydrocarbons minister Paula Henao said Venezuela had a “long history of success” in the Orinoco Belt that it intended to repeat with Exxon’s technology.

Exxon is the biggest name yet to answer Washington’s call to rebuild Venezuela’s battered oil industry — and the most reluctant. Chief executive Darren Woods angered Donald Trump in January by calling the country “uninvestable”, and the company held back for months while Chevron (NYSE:CVX), Eni (BIT:ENI; NYSE:E) and smaller US independents signed deals. As recently as October 30, Woods told analysts that more reforms were needed before any major entry.

A memorandum is not a contract. And the hardest questions remain open: Exxon’s old claims, a politically awkward Russian partner and who ultimately controls the cash.

A long fight over Cerro Negro

Exxon left Venezuela in 2007 rather than accept minority stakes when Chavez forced foreign operators into PDVSA-controlled joint ventures. It lost its 41.67% stake in the Cerro Negro heavy oil project, now called Petromonagas, and its share of the La Ceiba field, then spent more than a decade in arbitration.

A World Bank tribunal at the International Centre for Settlement of Investment Disputes (ICSID) awarded it about $1.6bn in 2014. An ICSID annulment committee struck out the $1.4bn Cerro Negro portion in 2017. Exxon has collected $908mn under a separate International Chamber of Commerce award against PDVSA and $260mn from the surviving parts of the ICSID award.

A resubmitted Cerro Negro claim produced a fresh award in July 2023. It set compensation at about $985mn but found most of that had already been paid through the ICC award, leaving about $77mn. Exxon has since sought to enforce the larger figure in a US federal court in Washington.

What happens to that claim is not public. ConocoPhillips (NYSE:COP), expropriated at the same time, is refusing to return until it recovers about $11bn it is owed, according to sources cited by Reuters in September. That was when Exxon was first reported to be negotiating for Petromonagas and adjacent areas of the Carabobo block.

Petromonagas brings a further complication. Russia’s Rosneft raised its stake in the venture to 40% in 2016. In 2020, after Washington sanctioned two Rosneft units for trading Venezuelan oil, the holding passed to the Russian state company Roszarubezhneft, which says its Venezuelan assets belong to the Russian state.

The Trump administration has said it wants to expand the presence of US companies in Venezuela while limiting access for those from “adversaries”, including Russia and China. Moscow, for its part, is seeking guarantees that changes to Venezuela’s legislation will protect existing Russian projects, deputy foreign minister Alexander Alimov said last month. How the issue plays out may depend on the renewed contacts between the Kremlin and the White House over ending the war in Ukraine. Last month Trump struck a deal with Vladimir Putin for Russia to supply more than 4mn tonnes of diesel to global markets and eased US sanctions on Russian diesel until April. The move was widely read as a reversal of years of US pressure on Moscow.

Washington holds the purse

Exxon would be returning to a very different country. US forces captured then-president Nicolas Maduro in a military operation on January 3, leaving his former deputy Rodriguez in place to run Venezuela under de facto US tutelage. Six days later, Executive Order 14373 shielded Venezuelan oil revenue held in designated US Treasury accounts from creditors.

Washington has raised more than $13bn from Venezuelan oil sales this year, according to Financial Times calculations. Meanwhile, Caracas is lobbying Treasury secretary Scott Bessent for access to the IMF and the Inter-American Development Bank while the US still holds its main source of income.

The hydrocarbons law, rewritten at the urging of Rodriguez’s interim government three weeks after the raid, opened the door to foreign investment and broke with the Chavista doctrine of state control over oil. Joint ventures with PDVSA still require a state majority, though the minimum falls from 60% to just over 50%. The bigger change is a new production participation contract, which lets private companies explore, produce and export without a joint venture or a state stake. Minority partners in joint ventures can also now be given operating control. Woods had told Trump in January that Venezuela needed durable investment protections and a reformed hydrocarbons law.

PDVSA’s own output has fallen to about 450,000 barrels a day, against a peak of 3mn bpd for the country as a whole. National output was about 1.2mn bpd in September, according to figures Venezuela reported to OPEC. PDVSA’s invoiced export revenue rose 60% to $18.7bn in the first nine months, according to Bitácora Económica, though nearly $2bn of that went on imported diluents needed to move extra-heavy Orinoco crude.

Chevron sets the benchmark

Chevron, which never left, is the yardstick. It expects gross output from its three joint ventures to reach about 300,000 bpd by the end of 2026. The ventures plan to invest $7bn over five years, and the company aims to double production to about 600,000 bpd by 2031 at total costs below $20 a barrel.

Italian energy firm Eni signed a 25-year contract in September to operate the Junin 5 field and restarted operations there in late October, targeting 200,000 bpd by 2028. Continental Resources, Harold Hamm’s company, signed a non-binding memorandum for the Ayacucho 2 block in September.

The most unusual entrant is North American Blue Energy Partners (NABEP), led by controversial businessman Alejandro Betancourt. Under an agreement with the US State and War departments announced by Trump in late August, the company holds commercial rights to 17 Venezuelan fields with more than 65bn barrels of proven reserves, backed by nearly $100bn of planned investment. The Pentagon holds a 35% stake in the company, and Washington has the right to buy a fifth of its output on preferential terms. Venezuela receives between 16% and 40% of production as royalties, depending on the field.

NABEP says it has raised output from 18,000 bpd to 223,000 bpd in two years and will overtake Chevron next year, on its way to more than 1mn bpd by 2033. But the claims have drawn scrutiny over the company’s financing and drilling capacity, and a PDVSA vice-president has said the 1mn bpd target is six to seven years away. The 223,000 figure was a single day’s output in barrels of oil equivalent, which includes gas, rather than a crude average.

Exxon starts behind all of them. Orinoco heavy oil needs upgraders, diluent and years of drilling. Only two rigs were working in Venezuela in August, according to Baker Hughes data cited by Rystad Energy, which expects national output to reach 1.6mn bpd by 2028 if investment and oilfield services pick up.

The freshly signed memorandum gives Exxon a seat at the table. Whether it yields barrels depends on a contract that has not been written, a claim that has not been settled and revenue that is still not Venezuela’s to spend. It also hinges on politics, the part oil companies leave unsaid. Rodriguez has promised elections but has so far refused to set a date, while the opposition, reinvigorated by the return of Maria Corina Machado last month, wants a vote in 2027, a timetable Machado says Washington has floated.