The oil price is 80 US dollars to avoid losing money! Trump's Venezuela oil plan 'cost challenged'

# Bao Yilong

Source: Wall Street CN

According to Wood Mackenzie estimates, the breakeven costs for major crude grades in Venezuela’s Orinoco Belt all exceed $80 per barrel—far higher than the roughly $55 per barrel level for Canadian heavy oil—casting doubt on their economic viability. Furthermore, restoring Venezuela’s peak production capacity would require major U.S. oil companies to invest $10 billion annually over the next decade, totaling $100 billion. Combined with historical precedents of oilfield assets being nationalized, major oil companies remain broadly cautious about returning to Venezuela.

Trump’s Venezuela oil plan hits a wall: high costs and political risks deter U.S. oil firms.

Last week, U.S. President Donald Trump announced that Venezuela’s interim authorities would transfer up to 50 million barrels of oil to the United States, later claiming his administration would take “indefinite” control of Venezuelan oil sales.

He also stated he would invite major U.S. oil companies to enter Venezuela and invest tens of billions of dollars to repair the country’s severely aging oil infrastructure.

Yet the plan faces severe challenges on both economic and political fronts. The breakeven cost for Venezuela’s extra-heavy crude exceeds $80 per barrel—far above the previous international oil price of $60 per barrel—meaning oil extraction is fundamentally unprofitable.

(WTI crude prices have recently risen to around $77 per barrel.)

Meanwhile, historical precedents of oilfield asset nationalization have made major oil companies highly cautious about returning to Venezuela.

## Vast Reserves, But Extraction Costs Prohibitive

Venezuela is a founding member of OPEC and holds the world’s largest proven oil reserves.

Its proven reserves are estimated at approximately 303 billion barrels, accounting for roughly 17% of the global total—more than five times the U.S. reserves of 55 billion barrels and exceeding those of major Gulf exporters such as Saudi Arabia, Iraq, the UAE, and Iran.

The vast majority of these reserves are concentrated in the **Orinoco Heavy Oil Belt**, an expansive region in eastern Venezuela stretching about 600 kilometers east-west and 70 kilometers north-south, with a total area of approximately 55,000 square kilometers. The belt is divided into four exploration and development blocks: Boyacá, Junín, Ayacucho, and Carabobo, and is primarily operated by **Petróleos de Venezuela, S.A. (PDVSA)**, the state-owned oil company.

However, massive reserves do not equate to readily accessible wealth. Venezuela’s oil is extra-heavy crude—highly viscous and dense—making extraction far more difficult than conventional oil and requiring advanced technologies such as steam flooding and blending with light crude. Due to its high density and sulfur content, extra-heavy crude typically trades at a discount in the market.

According to consultancy Wood Mackenzie, the average breakeven cost for major crude grades in the Orinoco Belt exceeds $80 per barrel, far above the roughly $55 per barrel breakeven cost for Canadian heavy oil. This means Venezuelan oil extraction is not economically viable under current price conditions.

Additionally, Venezuela’s reserve figures are self-reported and carry the risk of overestimation. As Reuters reported, in 2011, when international oil prices exceeded $100 per barrel, OPEC listed Venezuela as the country with the world’s largest reserves.

In the oil industry, the concept of “proven reserves” is not merely geological but also economic. Simply put, a barrel of oil is only counted as “proven” if extracting it is profitable. If oil prices are too low and extraction results in losses, that barrel effectively ceases to exist on the books.

Consultancy Rystad Energy estimates that, when adjusted for price factors, Venezuela’s oil reserves stand at approximately 60 billion barrels.

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## Restoring Capacity Requires $100 Billion Investment

The decline of Venezuela’s oil industry is staggering.

This once-major oil exporter, which shipped 3.5 million barrels per day, now produces only about 1 million barrels per day, due to aging infrastructure, chronic underinvestment, mismanagement, and sanctions pressure.

The scale of investment required to restore production to its 1970s peak is enormous. According to **Francisco Monaldi**, Director of Latin American Energy Policy at Rice University’s Baker Institute for Public Policy, major U.S. oil companies would need to invest $10 billion annually over the next decade, totaling $100 billion.

Even to maintain current output levels, Rystad Energy estimates $53 billion in investment will be needed over the next 15 years. Raising production above 1.4 million barrels per day would require an additional $120 billion by 2040.

The Trump administration has offered security guarantees but explicitly stated it will not fund oil projects, further raising barriers to private capital entry.

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## High Political Risks Deter Oil Companies

Beyond economic calculations, political risks represent an equally insurmountable barrier for oil companies.

Former President Hugo Chávez significantly strengthened state control over the oil industry during his tenure. In 2007, the government introduced new contract terms requiring PDVSA to hold a majority stake in joint ventures.

ExxonMobil and ConocoPhillips refused to accept these terms, leading the Chávez administration to forcibly expel both companies. To this day, ConocoPhillips still has approximately $10 billion in outstanding compensation claims. Currently, only Chevron is authorized to operate in Venezuela and export crude to the United States.

Last Friday, following a meeting between Trump and oil company executives, ExxonMobil CEO Darren Woods stated bluntly:

> Our assets there have been seized twice. As you can imagine, a third return would require quite significant changes.

Reports indicate oil companies will be reluctant to make major commitments until a new government emerges in Venezuela that can win the trust of international investors and banks.

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### Risk Warning and Disclaimer

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