Changes in the control of Venezuelan oil, could American company Chevron become the biggest winner?

According to CCTV News, Trump confirmed that the U.S. has captured Venezuelan President Maduro through military action and announced that the U.S. will "manage" Venezuela until a "safe" transition is achieved.

This has triggered a reassessment of control over Venezuela's oil industry, and while this geopolitical shift has limited immediate impact on global crude oil supply, it brings the possibility of reconstruction to Venezuela's long-declining energy sector, while also presenting new opportunities and risks for existing foreign investors.

As the country's political situation enters a period of turmoil, market attention quickly shifts to who will take over this oil resource with the richest global reserves. Analysts point out that if Venezuela can establish a pro-U.S. government supportive of investment in the future, American energy giant Chevron, with its existing market position, will be in the "best position" to expand its control and influence in the country's oil sector.

Despite the chaotic political situation, the risk of direct supply disruptions is considered relatively controllable against the backdrop of a currently oversupplied global crude oil market. Industry experts expect that Chevron's export operations in the country will remain stable, limiting immediate market impacts, but uncertainties in payment channels may lead to some export interruptions, bringing a risk premium of about $3 per barrel to oil prices in the short term.

However, any expectations for a rapid recovery in Venezuelan oil production face severe physical reality challenges. After decades of underinvestment and deteriorating infrastructure, even with a change in regime, the country's oil industry will require not only a stable security environment but also years of capital injection amounting to tens of billions of dollars annually to reverse the decline.

Chevron's Potential Advantages and Current Landscape

Currently, the lifeline of Venezuela's oil is nominally still in the hands of the state. Andy Lipow, president of Lipow Oil Associates, pointed out that Petróleos de Venezuela, S.A. (PDVSA) controls the vast majority of oil production and reserves. Although Chevron operates in the country through joint ventures, and Russian and Chinese companies are also involved through partnerships, "the majority control still belongs to PDVSA." However, this pattern may be reshaped with changes in the political winds. Saul Kavonic, head of energy research at MST Financial, believes that if Venezuela forms a government that is more friendly to the United States and supportive of investment, Chevron will be in the best position to expand its role. Additionally, European energy companies such as Repsol and Eni may also benefit from their existing business layouts in Venezuela.

Venezuela reached a production peak of about 3.5 million barrels per day in 1997, but according to Lipow Oil Associates, current production has plummeted to about 950,000 barrels per day, with exports around 550,000 barrels per day. This long-term decline has left a significant potential market space for international giants capable of capital investment and technological upgrades.

Short-term Supply Risks and the "Shadow Fleet"

Market concerns about short-term supply disruptions are primarily focused on the break in the commercial payment chain. Andy Lipow warns that due to the current uncertainty about who actually holds power in Venezuela, buyers may stop trading because they do not know who to pay, leading to a complete halt in exports.

Previously, the latest round of U.S. sanctions on Venezuela's "shadow fleet" has severely impacted its export capacity, forcing the country to cut production. These tankers, which operate outside the traditional shipping and insurance systems, have been the main channel for Venezuela to evade sanctions and export crude oil.

Nevertheless, Chevron is expected to maintain an export volume of 150,000 barrels per day, which plays a key role in alleviating supply pressure. Bob McNally of Rapidan Energy Group believes that given the current oil market is trending towards oversupply, the direct impact of this event is almost negligible.

However, uncertainty may still drive up prices. Lipow expects that broader political turmoil could bring about a risk premium of about $3 to oil prices in the short term. If opposition leader Maria Corina Machado's new government comes to power quickly, sanctions may be relaxed, and the sale of stored oil could initially boost exports and put pressure on oil prices.

The Road to Recovery is Long and Expensive

For the long-term prospects of Venezuela's oil industry, investor optimism is severely constrained by the state of infrastructure. Although Venezuela's heavy sour crude is favored by U.S. complex refineries, its extraction and transportation face enormous challenges.

Helima Croft of RBC warns that the road to recovery will be long. She points out that oil executives believe that to reverse the industry's decline, at least $10 billion needs to be invested annually, and a "stable security environment" is an absolute prerequisite. Lipow shares a similar view, emphasizing that Venezuela's oil industry is in such a state of severe disrepair that even with a change of government, it will require years of large-scale investment to repair existing infrastructure, making substantial increases in oil production unlikely in the short term.

Croft adds that if a chaotic power transition similar to that in Libya or Iraq occurs, the prospects for recovery will become even more uncertain, and "all bets will be off."