US says it needs to control Venezuelan oil sales indefinitely to force change

By Vallari Srivastava, Nathan Crooks and Jarrett Renshaw

Jan 7 (Reuters) – The United States needs to control Venezuela’s oil sales and revenues indefinitely to drive the changes it wants to see in the country, Energy Secretary Chris Wright said on Wednesday.

The comments reflect the importance of the South American country’s crude oil reserves to President Donald Trump’s strategy since US forces ousted Venezuelan leader Nicolas Maduro in a raid in the capital Caracas on Saturday.

“We need to have that leverage and that control of those oil sales to drive the changes that simply need to happen in Venezuela,” Wright said at the Goldman Sachs Energy, CleanTech & Utilities Conference in Miami.

OIL STORED GOES TO MARKET FIRST

He said the United States would market the stored Venezuelan oil first, then sell ongoing future production, including to US refineries specially equipped to process it, with proceeds deposited in accounts controlled by the US government.

Wright added that he was talking to US oil companies to learn what conditions would allow them to enter Venezuela to help increase production there.

“The resources are immense. This should be a rich, prosperous and peaceful energy powerhouse,” he said.

“That’s the plan.”

On Tuesday, Caracas and Washington reached a deal to export up to $2 billion of Venezuelan crude to the United States, a deal that would divert supplies from China while helping Venezuela avoid deeper oil production cuts.

The deal is a sign that Venezuelan government officials are responding to Trump’s demand that they open up to US oil companies or risk further military intervention.

Trump said he wants interim President Delcy Rodriguez to give the United States and private companies “total access” to Venezuela’s oil industry.

“Instead of the oil being blocked as it is now, we’re going to let the oil flow,” Wright said at the conference.

The sale of Venezuelan oil “will benefit the American people, the American economy and the global energy markets, but of course, it will also greatly benefit the Venezuelan people,” he said.

Shares of US refiners Marathon Petroleum, Phillips 66 and Valero Energy rose between 2.5% and 5%.

WHITE ROOM MEETINGS

Increasing crude output from Venezuela is a key objective for Trump, who is scheduled to meet with the heads of major oil companies at the White House on Friday, according to the sources.

Representatives from Exxon Mobil, ConocoPhillips, and Chevron – the top three US companies, all of which have experience in Venezuela – will be present, according to a source familiar with the planning.

The companies declined to comment.

Venezuela was producing as much as 3.5 million barrels per day in the 1970s. But mismanagement and limited foreign investment have led to a big drop in annual production, which averaged about 1.1 million bpd last year.

Wright said he believes short-term production increases in Venezuela are possible, but that a larger recovery to past production levels will take years.

“We can get several hundred thousand barrels per day of additional production in the short to medium term if the conditions are there for only small capital deployments,” Wright said. “To get back to historical production numbers, you know that takes tens of billions of dollars and significant time,” he said.

The South American country sits on the world’s largest oil reserves but accounts for only about 1% of global supply.

(Reporting by Nathan Crooks and Sheila Dang in Miami and Vallari Srivastava in Bengaluru; Writing by Richard Valdmanis; Editing by Saumyadeb Chakrabarty, Sriraj Kalluvila, Rod Nickel)