But the recent eruption of fighting between the United States, Israel and Iran has shifted the calculus, exposing the fragility of the Middle East as a reliable energy supplier and giving Venezuela an unexpected second look.
Industry lawyers and consultants familiar with the discussions told POLITICO that companies large and small are now showing renewed interest in committing to drill in the South American nation. The shift comes after President Donald Trump’s removal of Venezuelan leader Nicolás Maduro and the administration’s subsequent push for private investment had met with widespread reluctance.
“You see this view industry-wide, right or wrong, that there’s a long-term disruption going on all over the market,” said Jason Bennett, global projects director at the law firm Baker Botts. Venezuela, he added, is “looking pretty good right now, despite their historical problems.” Bennett noted that larger international firms are also giving neighboring Argentina a closer look as oil shipments through the Strait of Hormuz remain effectively halted.
Formal, binding contracts could soon follow, industry officials said, marking a significant win for the White House. Until now, the administration had pointed only to non-binding agreements signed by smaller companies as evidence of progress. But the mood has grown more serious as companies overcome earlier anxieties about working with Venezuela’s government and as oil prices stay elevated above the $67 a barrel level seen before the Iran conflict escalated.
Reforms and Reservations
The Venezuelan government’s recent reforms to its oil industry regulations, while still imperfect, have moved far enough in the right direction to ease the worst fears of U.S. executives, Bennett said. Companies are now in active discussions with White House officials about committing to develop specific oil fields in a country that holds the world’s largest crude reserves.
To encourage deal-making, Venezuela has begun setting aside fields for companies that sign non-binding memorandums of understanding, effectively allowing them to informally claim areas as long as negotiations continue, according to people familiar with the talks. One industry lawyer whose clients have engaged the White House on potential Venezuelan drilling said, “I’ve signed up probably as many new clients over the last few weeks than I did when things first ‘opened up.’”
President Trump announced a peace deal between the U.S. and Iran on Sunday that he said would “fully authorize the toll-free opening” of the Strait of Hormuz. But the broader disruption has already reshaped industry thinking, with Venezuela emerging as an unlikely beneficiary of the chaos in the Middle East.
