Reviving Venezuela’s oil production flow will not be easy or cheap

President Donald Trump over the weekend described a scenario in which U.S. oil companies would dive into Venezuela following the fall of President Nicolás Maduro and “spend billions of dollars, repair badly damaged infrastructure” and “return to generating money for the country.”

But Trump’s oil goals face formidable challenges.

A small number of Western producers with existing operations or agreements in Venezuela could increase production relatively quickly if political conditions were favorable.

But a more robust revitalization of the country’s struggling oil and gas industry would likely take years and require tens of billions of dollars in investment.

The potential prize is enormous — Venezuela has the largest oil reserves in the world — but the risks are also great, and US energy companies such as Exxon Mobil and ConocoPhillips have already been hurt by previous experiences in the country.

Oil prices are also low, having fallen more than 20% in the last year, making it harder for companies to justify new spending.

For now, two big questions facing oil companies are how Venezuela’s government will rebuild after Maduro’s capture and whether the United States will lift sanctions imposed to weaken the country’s economy.

“There are not many companies that are going to rush into an environment where there is no stability,” said Ali Moshiri, who headed Chevron’s Venezuela operations until 2017 and now runs a private oil company with interests in the country.

Chevron, the largest private oil producer in Venezuela, and smaller operators could potentially help boost the country’s output to as much as 1.5 million barrels a day within 18 months, Moshiri said. This would cost up to US$7 billion (R$38 billion), considering the current estimated level of around 1 million barrels per day, he said.

Still, this would leave Venezuela producing just over 1% of the oil consumed in the world and less than half of what it pumped in the late 1990s.

Further expansion would likely take years. This is because much of Venezuela’s oil infrastructure is deteriorated and, even if producers show interest in returning, it would take time to negotiate contracts and reestablish a presence in the country.

“A lot depends on politics and who is in charge,” said Daniel Yergin, a Pulitzer Prize-winning energy historian and vice president at research firm S&P Global.

Some analysts have drawn parallels with Iraq, where it took years for oil production to recover after the 2003 US invasion.

For now, Venezuela’s oil industry remains under US sanctions, weakened by an aggressive campaign against many of the tankers used to export the country’s oil.

Those restrictions will continue as the United States pressures the Venezuelan government for policy changes, Secretary of State Marco Rubio said Sunday.

“That’s an enormous amount of leverage that will continue to be in place until we see changes that not only advance the national interest of the United States, which is No. 1, but also lead to a better future for the people of Venezuela,” Rubio said on CBS News’ “Face the Nation.”

So far, only Chevron has managed to export oil regularly in the weeks since the United States seized a ship called the Skipper on Dec. 10, according to TankerTrackers.com, which tracks global shipping.

The company has an exclusive license from the Trump administration that has allowed it to continue operating in Venezuela and shipping oil to refineries on the U.S. Gulf Coast. Therefore, it is widely seen as the best positioned to increase production if conditions in the country stabilize.

Other energy companies that have maintained a presence in Venezuela include Italy’s Eni and Spain’s Repsol, which produce natural gas in offshore operations, although US sanctions have prevented them from exporting since last year.

The U.S. Treasury Department also last year issued a license that would allow London-based Shell to resume work on a Venezuelan offshore gas field, although Venezuela later halted negotiations.

Others, like Exxon Mobil and ConocoPhillips, left Venezuela after Maduro’s predecessor, Hugo Chávez, partially nationalized the country’s oil industry around 2007. These companies spent years trying, with little success, to get Venezuela to pay them billions for the assets the government confiscated.

More recently, Venezuelan authorities have tried to smooth relations with some Western oil companies. Maduro’s government was negotiating an oil trading agreement with ConocoPhillips until last year, The New York Times reported.

Following Maduro’s arrest on Saturday, ConocoPhillips said “it would be premature to speculate on any future business activities or investments” and did not comment specifically on the negotiations. Chevron said it continues to operate in Venezuela “in full compliance with all relevant laws and regulations.”

Moshiri said that as a first step to encouraging more foreign investment, the Trump administration would need to lift sanctions on Venezuela.

“The only silver bullet to turn the economy around today is investment in oil,” he stated.