US Says It Will Control Venezuela Oil Exports Indefinitely

The Trump administration plans to control future sales of Venezuelan oil and hold the proceeds in US accounts, Energy Secretary Chris Wright said, making the clearest statement yet on Washington's strategy to bring the impoverished nation's crude to market and control its most valuable resource.

Wright, who spoke at a Goldman Sachs Group Inc. conference in Miami Wednesday, said initially the barrels would come from crude Venezuela is holding in storage, which has been filling up amid the US blockade and threatening to force some production offline. 

"We're just going to get that crude moving again and sell it," Wright said. "We're going to market the crude coming out of Venezuela – first this backed-up stored oil and then indefinitely going forward we will sell the production that comes out of Venezuela."

The plan comes as the Trump administration is pushing for US energy companies to rebuild Venezuela's decaying oil infrastructure and revive its flagging production. The US is also selectively rolling back sanctions on Venezuela's oil sector as part of the effort, the Energy Department said.

President Donald Trump said Tuesday evening that Venezuela would relinquish as much as 50 million barrels of its oil for the US to sell, valued at about $2.8 billion at current market prices. 

The US has already begun marketing Venezuelan crude, White House Press Secretary Karoline Leavitt said during a briefing Wednesday.

Revenue from the sales will be held in US Treasury accounts, a move that would protect the proceeds from Venezuela's creditors, a person familiar with the matter said. The funds will benefit the American and Venezuelan people, Leavitt said.

"We're not stealing anyone's oil," Wright said during an interview with CNBC. "We're going to restart the selling of Venezuelan oil on global crude markets, put it in accounts in the name of Venezuela and bring those funds back into Venezuela for the benefit of the Venezuelan people." 

Proceeds from Venezuela oil sales will not initially be used to repay Exxon Mobil Corp., ConocoPhillips and other US companies whose assets were nationalised by Maduro's predecessor, Hugo Chávez, in the mid-2000s, Wright said. He added that those companies will need to be compensated but characterised it as a "long term issue."

Venezuela's state oil company, Petroleos de Venezuela SA, said in a statement that it's in negotiations with Washington over crude sales through a framework that would be similar to its arrangement with Chevron Corp., the only US oil major still operating in the country. 

Earlier, US forces seized two more sanctioned oil tankers, including one flying a Russian flag, as the Trump administration pushes to control all exports of Venezuelan crude. One was seized in the Atlantic Ocean south of Iceland, and the other was apprehended in the Caribbean region.

Trump is pushing for US oil companies such as Chevron, ConocoPhillips and Exxon to rebuild Venezuela's infrastructure and revive production now that the US has removed former President Nicolás Maduro. The administration has already had conversations with multiple oil companies, according to an official. The president is set to meet with energy executives on Friday, Leavitt said.

"It's just a meeting to discuss, obviously, the immense opportunity that is before these oil companies right now," she said. 

Secretary of State Marco Rubio also may attend the sit-down that's being planned, according to people familiar with the matter.

Venezuela's oil sector has suffered from years of corruption, underinvestment and neglect, and its production is less than 1 million barrels a day. Wright estimated that output could be increased by several hundred thousand barrels a day in the short to medium term.

Restoring the industry to its former glories would be a huge undertaking, costing an estimated $10 billion per year over the next decade, according to estimates from Francisco Monaldi, director of Latin American energy policy at Rice University's Baker Institute for Public Policy.

US oil companies have so far said little publicly about their willingness to take on such an endeavour.

Venezuela sits atop some of the world's largest crude reserves, but companies will want to ensure there's a stable government in place before making any long-term investments. They will also want some degree of confidence Washington will support their presence in Venezuela even after Trump is no longer in office.

Global oil futures slipped 1.5 per cent Wednesday, trading at around $60 a barrel.