US wildcat entrepreneur to invest in Venezuelan oil

A group of wildcat entrepreneurs traveled to Venezuela this week to help rebuild the country's battered oil sector, according to people present at the meeting.

The US investors met with representatives of state oil company Petroleos de Venezuela SA (PDVSA) and local private companies.

The delegation also included Harry Sargent III, a Florida-based oil businessman and key figure in linking U.S. business interests to Venezuelan oil.

The group is bringing “high risk-oriented investors and world-class management” to Venezuela's oil fields, Sargent said in an interview.

Under the current government, the oil sector is almost completely controlled by PDVSA, but foreign investors are now getting better deals.

Oil traders and executives from around the world have flocked to Venezuela since oil sanctions were eased in October, reducing deep discounts in oil prices. But there are still many hurdles for U.S. buyers as most financial sanctions remain.

January 12th^thit was announced that Sargent's Global Petroleum Management has signed an agreement to purchase six 95,000 barrel asphalt shipments from PDVSA.

“We believe we are in the seventh round of U.S. shale,” Sargent said. “So we're going to need cheap oil from somewhere else.” Venezuela's relative advantage is that much of its infrastructure is It has already been constructed. The country boasts 303 billion barrels of oil, the world's largest reserves, according to BP.

Certain types of crude oil from Venezuela are also in high demand from Gulf Coast refiners, which are traditional buyers. Western sanctions against Russia have strained the sector, with heavy Canadian crude being diverted west to the Pacific Ocean.

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is currently the only US oil major with operations in Venezuela. Some companies are trying to fill the void left by North American capital. European companies such as Repsol, Eni, Morel et Prom and Shell have entered the search for oil and natural gas. Indian, Russian and Chinese interests are also active in this field.

new common understanding

President Hugo Chávez (1999-2013) promoted nationalization and enacted the Hydrocarbon Law, which effectively made the hydrocarbon sector state property. President Nicolas Maduro was the first to carry on his legacy after his death.

But something changed during the deep economic crisis of the past decade. From peak to trough, about 80% of GDP was lost in current US dollars. Policies changed dramatically to address problems such as U.S. economic sanctions, hyperinflation, shortages, and violent crime.

Venezuela began accepting foreign capital under various conditions. Already in 2018, he saw one of the first steps, when Sargent struck a deal to restore the fields in exchange for an almost 50% stake. The project was put on hold due to US sanctions introduced in January 2019.

Natural gas is another example. Shell and the Trinidad National Gas Company will jointly operate an offshore gas field off the east coast of Venezuela. What is unusual is that the state cannot directly control it.

On the other hand, U.S. oil companies primarily support the Republican Party, so their interest in Venezuela could change the attitude of future administrations.

Under President Donald Trump, the White House pushed an aggressive regime change campaign that sought to strangle Venezuela until President Maduro stepped down.

The Biden administration has begun to change its approach, insisting it is negotiating with Caracas to hold free and fair elections in exchange for sanctions relief. This led to the release of prisoners, including 10 American citizens and several Venezuelan politicians.

The White House will also be concerned about global oil supplies, given the war between Russia and Ukraine and the current instability in the Middle East. The conflict with the Houthis in the Red Sea has added new controversy to the case.

Meanwhile, immigration from South American countries has become a controversial issue in US domestic politics. It is also a huge burden for America's allies in the region, which are hosting the largest number of Venezuelans in the past decade.

After recent visits, both sides in Washington, D.C., are expected to support some form of engagement with Venezuela. This changes the risk outlook for investors and oil traders. A Republican victory in 2024 does not necessarily mean a return to conflict with President Maduro.