MARY LOUISE KELLY, HOST:
President Trump has made no secret that he wants U.S. oil companies to profit off his removal of Venezuelan President Maduro. But there are lots of reasons why companies might be hesitant to rush in. NPR's Camila Domonoske takes a look at the obstacles and the incentives.
CAMILA DOMONOSKE, BYLINE: Let's start with this. Right now, the world is making more oil than it needs - by some calculations, about 2 million barrels per day more than it needs.
KEVIN BOOK: And if that sounds like a lot, it is.
DOMONOSKE: Kevin Book is the managing director at ClearView Energy Partners, an independent research firm. And because the world has more oil supply than demand, crude prices are quite low. The global benchmark is a little over 60 bucks right now. That's just not high enough to motivate companies to race to invest the billions of dollars that would be needed to dramatically increase production in Venezuela. In fact, for a few years now, oil companies have generally been kind of tightfisted about their investments, selective. Not like they used to be more than a decade ago during the fracking revolution, Kevin Book says.
BOOK: The go, go days of shale tended to be a drill-first-and-figure-out-the-math-later time in the oil industry's history, and it didn't go that well for many of the companies that produced first and asked questions later.
DOMONOSKE: At that time, U.S. oil companies drilled a lot of wells, the price of oil crashed, and they lost a lot of money. So right now, companies are asking questions first. Questions like, will we actually make money on this? OK, so the world has plenty of oil right now. Prices are low and companies are being cautious. On top of that, the crude that comes out of Venezuela is kind of gnarly. Claudio Galimberti is an economist with the research company Rystad Energy.
CLAUDIO GALIMBERTI: It is one of the heaviest and one of the dirtiest crude that you can find.
DOMONOSKE: Heavy crude is thick, sticky, viscous. It's more difficult to transport and to refine, and producing it is even worse for the climate than other types of oil. And on the surface, that might seem like yet another reason not to go after this oil, but here's the plot twist - the refineries along the U.S. Gulf Coast are perfectly set up for working with this tricky crude.
GALIMBERTI: Why? Because of the proximity to the crude from Venezuela.
DOMONOSKE: ...And to Mexico and the Gulf and Canada, all places with lots of heavy crude. Because they were close to that crude, refineries made big investments decades ago in the kind of equipment needed to refine that viscous stuff. But then that shale revolution happened, bringing a boom in light, sweet crude that doesn't need that equipment, and Venezuelan production collapsed. And now, some of that expensive equipment that's perfectly poised to handle heavy crude, it's kind of going to waste. So Galimberti says, if the situation in Venezuela truly stabilizes and oil companies do move in and boost production, it'd be great news for those refineries.
GALIMBERTI: Once these barrels come back, they fully utilize this equipment, and therefore they make more money.
DOMONOSKE: And then, of course, there's the long game. Yes, there's an oil glut today, and depending on what happens with electric vehicles and China's energy transition, maybe oil demand goes down. But then again, maybe in a few years, the world is hungry for oil again. And when companies are thinking about where to grow, there aren't many places with as much undeveloped oil as Venezuela. ExxonMobil and ConocoPhillips haven't operated in Venezuela since the government forcibly renegotiated contracts around 2007, which cost them billions. Chevron is the only U.S. oil company still operating in Venezuela.
Multiple oil companies declined to comment for this story. They haven't publicly signaled what they're planning. For now, the biggest question is whether the situation in Venezuela will stabilize enough that companies are willing to make investments at all. And even then, Galimberti says they'll probably need encouragement - subsidies - to do it at today's low prices. Camila Domonoske, NPR News.
KELLY: Meanwhile, President Trump said tonight that Venezuelan authorities will be turning over between 30 and 50 million barrels of sanctioned oil to the U.S. to be sold at market price.
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