Exxon Mobil Corp. and ConocoPhillips are pushing for durable contract terms and a mechanism to resolve billions of dollars owed to them as they consider re-entering Venezuela after exiting the country two decades ago.
Active Negotiations with Venezuelan Government
Both companies are in active negotiations with President Delcy Rodríguez’s government about tapping Venezuela’s vast oil reserves. While they have recently noted that Venezuela still needs to make progress on production-sharing agreements and other matters, the companies are privately encouraged by the willingness of Rodríguez and her advisers to negotiate different aspects of the contracts, according to people familiar with the matter.
An Exxon team met with United States embassy officials in Caracas recently and held discussions with Venezuelan officials in Houston. Earlier this month, Chief Executive Darren Woods stated that Exxon is studying how to apply its expertise in Canadian heavy oil to Venezuela’s crude, which has a similar high viscosity.
Political and Economic Context
The political push from both Rodríguez and U.S. President Donald Trump to restart production represents a once-in-a-generation opportunity for oil majors to tap into one of the world’s largest sources of crude unaffected by the conflict in the Middle East. Chevron Corp., unlike its U.S. rivals, remained in Venezuela through the late President Hugo Chávez’s nationalizations and years of U.S. sanctions. It is now in a prime position to quickly grow production as crude trades at about US$100 a barrel.
Exxon and ConocoPhillips do not want to miss out. Their interest has accelerated since January, when Woods called the country “uninvestable” under then-current conditions during a White House meeting. Nonetheless, both companies are cautious about potential political changes in the U.S. or Venezuela, some of the people said.
Potential Signal of Stability
For Venezuela, the return of Exxon and ConocoPhillips would signal a clear move toward economic stability, opening the door to more investors. “Bringing back Exxon Mobil and ConocoPhillips is a top priority for the government, and they’re putting a lot of resources and effort behind it,” said Carlos Bellorin, an executive vice president at Welligence Energy Analytics. “But for either company to seriously consider returning, the deal would likely need to be very attractive.”
ConocoPhillips stated in a release that it is evaluating opportunities in Venezuela, including gathering data and engaging in discussions with “relevant stakeholders.” “As with any potential investment, decisions will be guided by a range of factors, including economic and policy stability, safety, adherence to the rule of law and market competitiveness,” the company said. “Any decision to proceed would need to take into account mechanisms to recover the debt that is owed.” Exxon declined to comment.
Key Issues: Stability and Arbitration
One of the most critical issues is whether the companies can structure their investments to avoid losing billions of dollars if they were nationalized in the future. Global oil producers typically insist on stability clauses that prevent contracts from being unilaterally changed by successive governments when negotiating major deals to enter new countries. They also routinely require that any disputes be settled through international arbitration rather than local courts.
Recent changes to Venezuela’s oil law were designed to attract much-needed foreign investment in the country’s crumbling oil infrastructure. However, the success of these efforts hinges on whether Exxon and ConocoPhillips secure the safeguards they demand. The outcome of these negotiations could set a precedent for other international oil companies considering entry into Venezuela.
