Luisa Palacios on Rebuilding Venezuela's Oil Industry After the Quakes

**Luisa Palacios** (0:04)
I think that from an investor perspective, you have to go beyond what is written in the regulations and understand the whole of the rule of law and governance framework. Rules are necessary, but not a sufficient condition, particularly given the history, and because you cannot make the same mistake twice.

**Jason Bordoff** (0:25)
It started last year as a pressure campaign at sea with the United States seizing tankers as part of what President Trump called a total and complete blockade of vessels carrying Venezuelan crude subject to US sanctions. It crescendoed in the wee hours of January 3rd when US forces captured Venezuelan President Nicolás Maduro, bringing him and his wife to New York, our narcoterrorism charges. Since Maduro's removal, confusion remains over whether and to what extent the US is controlling the country's oil sector. But one thing is clear. Despite holding the world's largest oil reserves, Venezuela is producing at a fraction of its former levels, and its path to recovery is anything but certain. A national tragedy has only added to the instability. In June, twin earthquakes claimed more than 5,000 lives. While the country's energy infrastructure did not sustain significant damage, the quakes exposed deep fault lines in the country's political leadership and served as a stark reminder of an already long-standing humanitarian crisis in the region. So what's the state of the energy sector and energy investments in Venezuela? How has the global energy crisis changed the calculus for prospective energy developers? What role is the Trump administration playing in the sale of Venezuelan oil? And where's the oil production headed?
This is Columbia Energy Exchange, the weekly podcast from the Center on Global Energy Policy at Columbia University. I'm Jason Bordoff.
Today on the show, Dr. Luisa Palacios. Luisa is an adjunct senior research scholar here at the center, where she also previously served as our head of research. Before joining the Center on Global Energy Policy, Luisa was chairwoman of Citgo Petroleum Corporation, the US refining arm of Venezuela's state oil company, Pedevesa.
Luisa joined me to discuss the state of the Venezuelan energy sector and the impact of last month's earthquakes. We talked about the human tragedy in the wake of the earthquakes and what needs to happen to stabilize the country's infrastructure and its economy. We also discussed hydrocarbon law reform, the country's leadership dynamics, a lack of transparency into essential data on oil production, and what all of this means about the risk of US investments in Venezuela's oil sector. I hope you enjoy our conversation.
Luisa Palacios, welcome to Columbia Energy Exchange. Good to have you back with us. It's been too long.

**Luisa Palacios** (2:57)
Thank you, Jason. Really happy to be here.

**Jason Bordoff** (3:00)
I say it's been too long and it means the reason I wanted to talk to you, I always want to talk to you as you know. But in particular, we use this podcast every week to try to talk about the most timely, interesting, topical issues in the energy world. And I realized recently, we just haven't talked about Venezuela much lately. And it was all people wanted to talk about at the beginning of this calendar year. And then I think the world got distracted by other things like the largest energy supply disruption in history and the Strait of Hormuz. But the importance of Venezuela to the energy system and the importance, of course, of the political regime change, the consequences of what the Trump administration did by removing Maduro, enormously, to the country and the people of Venezuela who you know very well. So I really just wanted to have a check in to help me and help our listeners understand what some people may have missed if they haven't been paying as close attention as you have over the last six months or so to the situation in Venezuela. So just sort of help us, help everyone remember where we are. Earlier this year, the Trump administration used energy restrictions to apply pressure to Venezuela, a physical blockade. We've obviously had sanctions on the sector for a long time. Then the US military physically removed Maduro from power. Delci Rodriguez, Vice President took over.
There is a sense now that the US has a much larger role in the energy sector there. But help people understand the latest state of play in terms of where things stand in Venezuela with this transition to a new government. Is it a new government or just a continuation of Chivismo?
Then we could talk a little bit about what's happening in the energy sector as well.

**Luisa Palacios** (4:50)
Yes. Fantastic, Jason. Indeed, the fact that there were other geopolitical risk, even more important than the Venezuela affair, it says a lot about the state of global oil markets.