Luisa Palacios and Bob McNally on Why the US-Venezuela Oil Deal Matters

Luisa Palacios (0:04)

I think that is one of the concerns that people have. Really the way to pretty much de-risk Venezuela and mobilize significant investments in the whole sector. There are more sustainable ways to do that in a way that anchors those investments, which are long-term investments into a path that is credible and much more transparent and durable.

Bob McNally (0:35)

It creates problems while trying to solve problems. And I think if you look at a Chevron or an Exxon or a Conoco, it's been in there, been in there, and out of there over decades. I think they know what success is, they know what risk is. And I think having Uncle Sam sit with you at the table and your business partner is not necessarily the thing you want.

Jason Bordoff (0:59)

It's been a tumultuous year for Venezuela, marked by political upheaval and deadly earthquakes.

Then in late August, the Trump administration announced a deal for over 65 billion barrels of Venezuelan oil reserves and a 35% stake in North American Blue Energy Partners, or Nabep. The move could turn a little-known private company into one of the world's largest corporate holders of oil reserves. But Nabep wasn't the only headline. In the same week, Chevron pledged $7 billion to double its Venezuelan production. Italian Major ENI moved forward on a massive oil field agreement. And GE Vernova signed on to rehabilitate the country's crippled electric grid. All told, Venezuela signed deals covering more than 150 billion barrels of oil resources, an unprecedented scale up for a sector starved of investment for over two decades. Yet for all the fanfare, basic questions remain unresolved. What are the terms and the legal basis for the deal? What does direct US government equity in Venezuelan oil actually mean for American energy security and for oil prices? Where does the deal fit in the long energy history between the US and Venezuela? Is this a genuine turning point or just the latest swing in a cycle of investments and setbacks that has not yet delivered lasting progress for ordinary Venezuelans?

This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I'm Jason Bordoff.

Today on the show, Luisa Palacios and Bob McNally. Luisa is an adjunct senior research scholar here at the center where she was also our head of research. Before joining CGEP, Luisa was chairwoman of Citgo Petroleum Corporation, the US refining arm of Venezuela's state oil company, Pdvsa. Bob McNally is the founder and president of Rapidan Energy Group, an independent energy consulting and market advisory firm. From 2001 to 2003, he served on the White House National Economic Council as special assistant to President George W. Bush. And in 2003, he was also the senior director for International Energy on the National Security Council, the same job I held for President Obama. His 2017 book, Crude Volatility, The History and the Future of Boom Bust Oil Prices, examines the history of oil price swings. Luisa and Bob join me to discuss fundamentals of the deal and the many questions that remain unanswered. We considered what the deal means for the current Venezuelan government and Venezuelan people, how it fits into the long history of its oil industry, and what this equity stake really means for the United States. I hope you enjoy our conversation.

Luisa Palacios, Bob McNally, great friends, CGEP colleagues. Welcome to Columbia Energy Exchange. Again, great to have you both on. Thanks for making time.

Luisa Palacios (3:59)

Hi, Jason.

Bob McNally (4:00)

Hi, Jason. Thanks for having us on.

Jason Bordoff (4:03)

We're going to jump right into things after hopefully people got a little bit of a Labor Day break with some rest and relaxation. Of course, the energy world never stops from Hormuz, oil markets, and in this case, one of the things we want to talk about is Venezuela.

So people, especially in the waning days of summer, maybe with some holiday packed in here and there, will have seen some headlines, but just may not fully understand the details, and details were a bit scarce for a time. So all of this may not be fully understood yet, but we'll have seen the announcement from the Trump administration claiming a big deal with Venezuela, where an entity with significant US government control reportedly has control now over reportedly 65 billion barrels of oil reserves. Trump took to social media to call it the biggest oil deal in world history. That sounds like a pretty big deal. Let's start with you, Luisa. Tell us what we know about what was actually done with this announcement with the US government, with the Venezuelan government, and with this private company owned by Alejandro Betancourt.