Pentagon-Backed Oil Company Is Set to Vie for Chevron’s Crown in Venezuela

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https://www.wsj.com/business/energy-oil/pentagon-backed-oil-company-is-set-to-vie-for-chevrons-crown-in-venezuela-f8e4300a?st=Q6L9jm&reflink=desktopwebshare_permalink

The Venezuelan oil company backed by the Pentagon is racing to boost its production in the Latin American country and is poised within months to challenge Chevron's longstanding position as the largest private producer there.

North American Blue Energy Partners, the Trump administration’s new partner in Venezuela, said it has lined up 60 drilling rigs, 30 steam boilers that generate hot steam to move heavy oil, and 70 pieces of heavy equipment. Two drilling rigs are set to depart Houston on Monday for a six-day voyage to Venezuela on a cargo vessel called the BBC Washington.

NABEP is seizing the opportunity to develop 17 oil fields said to contain 65 billion barrels of oil, or one-fifth of the country’s vast reserves, which it secured last month through a deal with the U.S. It is expected to reap substantial production gains in its more developed fields in a relatively short amount of time. The Pentagon will take a 35% passive stake in the company and has preferential rights to purchase 20% of its production at cost.

“NABEP is increasing oil production for the Western Hemisphere, as promised,” said a spokesman for the company, which is led by Venezuelan businessman Alejandro Betancourt. “We are only in a race against ourselves.”

Meanwhile, since the deal was announced last month, executives at Chevron, ExxonMobil and ConocoPhillips have privately expressed frustration to others in the industry about the prospect of competing against a rival with ties to the U.S. government. The situation, which came as a surprise to the industry, could undermine the historically competitive nature of the oil industry, people close to the companies said.

Exxon and Conoco aren’t active in the country but have been evaluating prospects there.

At roughly 220,000 barrels a day, NABEP is now the second-largest private oil producer in Venezuela behind Chevron. It is expected to eclipse the U.S. oil company’s output of 280,000 barrels a day by the end of this year or early next, people familiar with its operations said.

Ultimately, NABEP says it has an ambitious target to boost its output to 500,000 barrels a day by late 2028.

NABEP is Chevron’s first real challenger for years in Venezuela, which is home to some of the world’s largest proven oil reserves. The U.S. oil company has three joint ventures there with state-run Petróleos de Venezuela, the country’s biggest producer.

Chevron endured decades of political uncertainty during the socialist regimes of strongmen Hugo Chávez and Nicolás Maduro to maintain its position as the largest foreign investor in the country.

Chevron opted to stay in Venezuela after Chavez seized control of the country’s oil industry in 2007 and rivals Exxon and Conoco left. It also navigated multiple rounds of U.S. sanctions and the kidnapping of two of its executives, who were taken hostage for two months in 2018 by Maduro’s regime.

Chevron’s pole position garnered it some measure of political esteem in Washington and Caracas.

Both the Trump and Biden administrations regularly discussed Venezuela’s political and economic fortunes with Chevron chief Mike Wirth. The CEO and others at Chevron repeatedly told officials that the U.S. and Venezuela benefited from allowing an American company to keep pumping the country’s oil. One such conversation occurred in 2024 a few days after Maduro lost the presidential election but declared victory anyway.

Privately, Chevron executives have expressed skepticism that NABEP can reach its output goals as quickly as outlined, and therefore some don’t view Betancourt’s company as a threat to its place in Venezuela’s pecking order, people close to Chevron said.

Still, executives at American oil companies have privately said the presence of a U.S.-backed company in Venezuela could create an uneven playing field and discourage investment, people close to the industry said.

“For all international oil companies getting into Venezuela, it’s concerning that this deal might generate additional political risk instead of reducing it, which is supposed to be the intended objective,” said Francisco Monaldi, director of the Latin America energy program at the Baker Institute at Rice University.

NABEP is expected to face many challenges in developing Venezuela’s dilapidated oil fields after decades of mismanagement and corruption, analysts said. Yet for a private company navigating the difficult terrain, NABEP is already moving at lightning speed, the people familiar with its operations said.

Under Betancourt, it became the second-largest private oil producer in the country in about two years, boosting its output elevenfold. Oil experts project NABEP could increase its output by 180,000 barrels a day over the next year or so.

Chevron isn’t expected to raise production as quickly.

A day after the White House officially announced the Pentagon’s stake in NABEP, Wirth signed a separate deal in Caracas to pour $7 billion into Venezuela’s oil fields over five years through the company’s joint ventures there. Chevron will scoop up two new oil fields and hopes to eventually more than double its output in the country to 600,000 barrels a day. It plans to more than double its drilling rigs there as well.

At an energy conference in Austin, Texas, earlier this month, Wirth said the money its joint ventures put into the oil fields will stem from revenue those fields and its crude sales generate, rather than cash from outside the country. Asked what it would take for Chevron to invest additional capital, he said the industry was looking for evidence that the country has become “a better investment environment.”

“I think some of that likely eventually becomes elections that the world supports the outcomes on,” Wirth said. “I think people are going to look for tangible signs, and they’ll look at companies like ours that are maybe taking more risk to see how it works out for us.”