While other oil executives at the White House showered President Trump with praise, ExxonMobil CEO Darren Woods delivered a blunt assessment, calling the Venezuelan oil sector “uninvestable” and stating that major reforms would be necessary before committing the billions needed to revive its deteriorated crude industry.
On January 11, a visibly annoyed Trump informed reporters that he would “probably be inclined to keep Exxon out” of Venezuela. “I didn’t like their response. They’re playing too cute,” the President remarked.
Woods, a career Exxon employee who took over as CEO in 2017 after his predecessor Rex Tillerson joined the Trump administration, is a quiet yet forceful leader who has become an unofficial spokesman for the industry as head of the world’s largest oil major.
However, he has unintentionally clashed with the president, who is pushing U.S. oil giants to rapidly invest over $100 billion in Venezuela’s oil sector.
“There was nobody to say anything, except Darren, and he’s eloquent as heck,” stated Jim Wicklund, a veteran oil analyst and managing director at PPHB energy investment firm. He added that Exxon’s stock would likely have dropped if Woods had made excessive commitments to Venezuela.
“This is Trump’s problem. The industry feels no urgency whatsoever to return to Venezuela. And there’s almost no incentive aside from a guarantee of profitability, which is impossible,” Wicklund said. “You can improve the terms, but the political risk is ten times greater.”
“We don’t need Venezuelan oil. Increasing Venezuelan production would actually harm other players, including U.S. producers, because the market is already oversupplied with oil.”
President Trump, however, is also seeking more oil to drive down prices, as cheaper fuel costs could be advantageous for the upcoming midterm elections.
ExxonMobil, in particular, had its assets in Venezuela seized by the government in 2007, resulting in billions of dollars in losses. Despite holding the world’s largest proven oil reserves, Venezuela’s output has collapsed to a third of its level at the turn of the century due to gross mismanagement, labor strikes, and U.S. sanctions.
Trump has cited the 2007 asset seizures as justification for the surprising January 3rd military action and arrest of leader Nicolás Maduro, repeatedly referring to the expropriations as the largest theft in American history.
On January 9, the President assembled a notable group of international oil executives at the White House to discuss plans for entering Venezuela, investing, and overhauling its industry.
Woods, more than anyone else, tempered Trump’s zeal for swift, large-scale investment. While he pledged to send a technical team to Venezuela within two weeks for an assessment, he indicated that any significant financial commitments would require a much longer timeline.
“The fundamental questions are: How durable are the financial protections? What are the terms? What do the commercial and legal frameworks look like?” Woods explained. “All these elements must be established to make an informed decision about the return on an investment of billions of dollars over the coming decades.”
Exxon did not provide a comment on January 12, and the White House also refused to elaborate further.
Oil desires meet reality
Dan Pickering, founder of Pickering Energy Partners, mentioned he anticipated “cheerleading” from the oil executives, and they “delivered in spades”—with the exception of Woods.
“If you needed just one piece of information about what will actually occur, Exxon provided it,” Pickering said. “We could have ended the meeting right then.”
The reality, according to research firm Rystad Energy, is that merely doubling Venezuela’s current oil output would likely take until 2030 and cost approximately $110 billion. Returning production to its peak levels from the year 2000 would require well over a decade and nearly $185 billion.
Wicklund noted that ExxonMobil recently spearheaded the offshore oil industry in Guyana, Venezuela’s neighbor to the south, and continuing investment there is a more logical choice than returning to Venezuela.
“When faced with the option of investing capital in another well in Guyana, an offshore well in Brazil, an acquisition in the Permian Basin, or spending $20 billion and waiting years for a marginal increase in oil from Venezuela, Venezuela is the least attractive option,” Wicklund stated.
Substantial investment is required to rebuild Venezuela’s infrastructure long before it can become profitable again. Even though the oil reserves are proven, production is not cheap because the extra-heavy Venezuelan crude is difficult to extract. A diluent—a very light oil—is necessary to thin the heavy crude so it can flow from the wells.
“You’re essentially talking about having to import oil to extract oil. It’s basically sludge,” Wicklund said.
Wicklund suggested that Woods might have “sugarcoated” his message slightly more, but he did commit to sending personnel quickly—just not capital.
“He might regret his phrasing now, but it wouldn’t have altered the underlying reality.”
Despite this, Trump maintains a position of strength in Venezuela, as controlling the oil sector can compel the acting government to cooperate.
“The U.S. doesn’t need the oil, but it’s an ideal method to control Venezuela,” Wicklund said. “Why leave the existing structures in place? For stability. They may all resent you, but now Trump holds the purse strings. It’s a rather brilliant strategy, and the natural economics of the oil and gas industry will ultimately prevail.”