About that Venezuelan oil

There’s been a lot of crowing by Trump about how he’s seizing Venezuelan oil to hand it to American oil companies and skim profits for the United States. What oil, and how much?

“According to figures widely cited throughout the media and the oil industry itself, Venezuela is sitting on around 300 billion barrels' worth of "proved" oil, meaning barrels that have, in theory, been confirmed as commercially viable by conclusive testing or actual production.”

*snip*

“This is a self-reported figure, however, and is published — but not verified — by the Organization of Petroleum Exporting Countries, or OPEC, of which Venezuela is a founding member. Holistic and conclusive evaluations by independent experts have never been conducted.

“And up until 2007, Venezuela's self-reported proved reserves sat at around 100 billion barrels, according to data reported by OPEC. By 2013, that figure was updated after a reclassification of fields controlled by the country's state-run Petróleos de Venezuela, S.A. (PDVSA).”

So there’s doubt about the size of the reserves. What about the market for that oil?

“"The market does not need new barrels right now," said Robert Yawger, director of energy futures at Mizuho Securities, adding that "the big oil majors may be hesitant to increasing production" when West Texas Intermediate, the US crude benchmark, is changing hands below $60 per barrel.”

OK, but that oil will just pop out of the ground on its own, right?

“President Trump said he expects the US oil industry to spend "billions" to rebuild Venezuela's infrastructure.

“But to return Venezuela to its production highs of the early 2000s of around 3 million barrels per day would likely take around $180 billion in extra funding between now and 2040, according to energy intelligence firm Rystad Energy.”

“And Rystad estimates that international investors and operators would need to commit at least $30 billion to $35 billion of that capital within the next two to three years. The firm estimates that more than $50 billion of investment would be needed over the next 15 years just to maintain Venezuela's current output.

"Seizing oil reserves that are in the ground is completely different than actually producing those reserves and getting it to market,” Andy Lipow, president of energy consultancy Lipow Oil Associates, told Yahoo Finance.”

And there’s oil and then there’s oil:

“An additional problem is the kind of oil extracted from Venezuela's reserves, which is largely a heavy, sulfurous or "sour" grade that doesn't flow as nicely up the well bore to reach the surface and, because of its high sulfur content, more quickly corrodes equipment. Once this oil is out of the ground, it's too thick in its natural state to be transported through pipelines, so it must first be converted to liquid.

“This makes refining the oil a more complex, more time-intensive, and more expensive process than what is required for the lighter, sweeter variants like the ubiquitous WTI grade in the US.”

So there may not be as much oil as Trump thinks, it will take billions to get it out of the ground, it will be expensive to refine and the world doesn’t need more oil now anyway. Where’s the business model here? Trump oil looks like Trump Casino.

https://finance.yahoo.com/news/venezuela-says-it-has-the-worlds-largest-reserves-of-crude-oil-making-it-viable-is-a-whole-other-problem-181512098.html

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