(Seoul = Yonhap News) Reporter Koh Il-hwan – Interest is growing regarding the impact the collapse of Venezuela’s Nicolas Maduro regime may have on the future international crude oil market.
U.S. President Donald Trump declared the Venezuelan oil industry ‘bankrupt’ shortly after the arrest of President Maduro at a press conference, expressing plans to normalize it through substantial investment.
However, the New York Times (NYT) on the 3rd (local time) introduced expert opinions that implementing President Trump’s plan would require significant costs and time.
Venezuela, with oil reserves exceeding 300 billion barrels, is recognized as the country with the world’s highest potential, surpassing Saudi Arabia.
However, due to poor management of oil infrastructure and U.S. sanctions, Venezuela’s current crude oil production is only around 1 million barrels per day.
This accounts for merely 1% of the world’s oil production.
President Trump expressed confidence that if U.S. energy companies rebuild Venezuela’s oil infrastructure, an increase in production would be possible.
He presented a blueprint for rebuilding the Venezuelan economy with the proceeds from the oil industry, stating, “Replacing Venezuela’s oil infrastructure will allow us to sell oil on a much larger scale.”
In reality, Chevron in the U.S. is familiar with the local circumstances, having been granted a special exemption from U.S. government sanctions on Venezuelan oil since 2019, producing 200,000 barrels of crude oil daily.
If U.S. energy companies have greater access to Venezuela’s crude oil, the recovery of the oil industry is expected to gain momentum.
However, experts pointed out that considerable hurdles must be overcome before President Trump’s vision can be realized.
First, the cost issue must be resolved.
It is estimated that increasing oil production by 500,000 barrels per day will cost $10 billion (about 14.5 trillion won) and take around two years.
To achieve a greater increase in production as suggested by President Trump, preemptive investments running into tens of billions of dollars over several years are essential.
Political risk is also identified as an inextricable variable.
Depending on the development of the Venezuelan political situation following the collapse of the Maduro regime, energy companies operating locally may become embroiled in confusion.
Helima Croft from RBC Capital Markets pointed out, “President Trump may impose a ‘quasi-governmental role’ on energy companies that have entered Venezuela.”
This suggests that due to such risks, energy companies might approach involvement in Venezuela’s oil industry with caution.
No significant trends have been observed in the international crude oil market regarding the collapse of the Maduro regime.
Currently, the oil market is in a state of oversupply, and Venezuela’s share of oil is low.
Research firm Third Bridge analyzed that the collapse of the Maduro regime would not have an immediate effect on oil prices or the gasoline prices felt by ordinary citizens.