This analysis focuses on the reasons why there is no bonanza in waiting for the US in terms of Venezuelan oil capture. In brief:
- It's the wrong sort of oil and there is little global demand for it.
- Costs of getting it out of the ground and refining it are very high - even for US oil majors - and the lead time to increase production substanially is long (5- 7 years)
- Total extra Venezuelan oil production that could be achieved after 5-10 years is small in terms of global supply (3-4%). That's the same what Iran pumps today and is equal to about 1./3rd of Russia's output!!
- US policies required to produce both social stability and foreign investment in Venezuea are missing in any plans put forward by the US Administration to date. For the reasons descroibed in the report, leaving oil related investment apart, the need is for a massive mutli year investment in Venezuelan social infrastructure. Without stability, long term oil contracts will not get signed. And there is also a massive overhang of legacy issues to cope with - like US$ 200bn in unserviced foreign sovereign liabilities and outstanding legal liabilities that are owned to previously expropriated US (and other) oil producers..
- China is a US$2bn investor in current Venezuelan oil production. Is the US going to go head to head with Beijing in its ambition to make Caracas only do business with the US?????
- The fate of Trump's new love of the "Spheres of Influence" gepoltical doctrine (inaccurately desribed as Monroe or, of late, "Donroe" doctrine) is likely to depend on the outcome of the Venezuelan venture. As that venture is more likely to fail than succeed that could be another hit to this Administration's credibility going into the mid terms..