Trump’s Trillion-Dollar Oil Play: A Trap For Big Oil?

U.S. President Donald Trump’s core vision of the future of global oil and gas is to have as much of that supply as possible coming from his self-proclaimed ‘Americas’ region, which is directly in the U.S.’s sphere of influence. Venezuela is one of the key countries from which this increased production is designated to flow, which is why Washington is focusing so much of its efforts on encouraging heavy investment from American oil and gas giants into the country. It is in this context that very recent changes to Venezuela’s ‘Organic Hydrocarbons Law’ should be seen. But are they ultimately likely to achieve their objectives?The details of these multiple changes to the law were definitively laid out over the past couple of weeks during and after the ‘Venezuela Global Investment Forum 2026’, which was part of a massive push by state oil firm Petróleos de Venezuela, S.A. (PDVSA) to lock in 105 new oil contracts by the end of this year. This was the first time the new government -- following the U.S. removal of former president Nicolás Maduro in January -- had delineated the exact tiered fiscal rates on a major international stage to tempt in global capital, despite the broad framework being technically written in January and clarified with fiscal regulations in July. In broad terms, the message presented by Venezuela’s vice minister of commercial policy, Ricardo Gomez, during and after the investment forum has been that the majority state control model for the oil and gas sector established under former president Hugo Chávez, and continued by Maduro, is over and that company operators can now have exclusive control over assets in the sector. A crucial addition here is that Venezuela’s amended Organic Hydrocarbons Law has created new investment opportunities across its oil and gas sector, offering international companies varied contract options for developing heavy-oil reserves, mature fields, offshore gas resources and refining infrastructure. The new legal framework allows international investors to choose between hydrocarbon productive participation contracts, restructured joint ventures with state-owned PDVSA, and direct contracts covering infrastructure and oilfield services. For example, perhaps the most direct investment route for foreign firms into the country’s oil and gas sector is offered by the ‘hydrocarbon productive participation contracts’ (CPPHs). In this structure, a company incorporated in Venezuela operates a designated area at its own cost and risk for 25 years and, with ministerial approval, it will also have the legal right to sell its own share of the produced oil and gas directly to international buyers, completely bypassing PDVSA’s trading desks. This is a huge change from the Chávez/Maduro model, under which only PDVSA or another state-controlled entity had the legal monopoly to market and sell the crude. Under that structure, private partners were forced to let PDVSA handle the sales and then wait to be paid their share of the revenues -- a system that frequently led to foreign firms being trapped by PDVSA’s cash-flow crises, defaults, and the impact of primary US sanctions. This new CPPH model has already been used by Italy’s Eni, which transferred its Junín-5 heavy-oil field (with 35 billion barrels of certified oil in place) to this contract type in September, moving from a minority joint venture position to become the asset’s exclusive operator.In parallel with the multiple contract types now available, each form will carry with it different combined royalty and tax rates. For example, at the bottom there is a 20 percent rate on investment in new infrastructure and unexplored land for greenfield projects. Next up is a 25 percent rate on Orinoco Belt development for extra-heavy crude oil. A 30 percent rate applies to defunct or heavily damaged non-producing brownfield sites. And at the top, there is a 35 percent rate for investment in existing operational assets in brownfield areas. At the same time, the updated investment framework regulations published in July cap royalties at 30 percent and the integrated hydrocarbons tax at 15 percent. Additionally, qualifying offshore projects and developments incorporating upgrading or refining infrastructure may receive reductions of up to five percentage points.Looking at the positives first, the revised hydrocarbons framework broadly represents Venezuela’s most aggressive and pragmatically designed attempt to attract foreign investment in decades, offering a highly competitive structure on paper. Capping the integrated hydrocarbons tax at 15 percent and lowering total fiscal rates for trickier greenfield or extra-heavy projects shows the government is directly addressing the historically punitive ‘resource nationalism’ of the Chávez/Maduro era that previously drove foreign oil and gas majors out of the country. The minimisation of state interference by allowing foreign firms like Eni to act as exclusive operators is another positive, as it minimises the risks of domestic corruption in key projects. Similarly beneficial is granting investors the right to market their own share of production, thereby solving the historic cash-flow trap resulting from having to wait for PDVSA to pay them. And finally, tailoring the combined royalty and tax rates to the difficulty of exploring and developing the assets -- and offering a 5 percent discount for infrastructure or offshore gas integration -- creates true project visibility and clarity for extra-heavy oil initiatives.On the other hand, there remain several structural hurdles. One of these is that any major Western investment must still align with U.S. Treasury (OFAC) general licences, and if the political policies in Washington underpinning these shift, such licences could be revoked. Another from the operational perspective of international firms is that reviving mature fields or upgrading refining throughput from 350,000 to 600,000 bpd requires billions in upfront capital. Because Venezuela remains largely cut off from traditional international banking systems and debt markets, project financing will be extremely difficult to secure. On the other side of the equation, Venezuela has a long history of expropriating assets and unilaterally rewriting contracts, and there are multiple potential legal reasons available for it to do so should it wish, based on the manner in which the U.S. took control of the country’s hydrocarbons sector in the first place. Trump’s ‘biggest oil deal in world history’ signed on 2 September between Washington and Caracas involved the U.S. taking control of 65 billion barrels of Venezuela’s proven crude oil reserves (out of a 303-billion-barrel total) across 17 fields for a concession period of 100 years. The private entity driving the deal -- North American Blue Energy Partners (NABEP) -- instantly became the second-largest private oil company by reserves in the world (after ExxonMobil), with the U.S. Department of War holding a 35 percent equity stake.Venezuela’s constitution required National Assembly approval for any long-term concessions over strategic national resources. Moreover, as the deal was negotiated by an interim government whose constitutional legitimacy was already contested, any future Venezuelan government could argue that, as the interim administration lacked authority, the entire agreement should be declared ultra vires (beyond legal powers) and void. In fact, that could be done even without any change in government, as Venezuela’s Supreme Tribunal of Justice has the constitutional mechanisms to challenge, freeze, or entirely invalidate the NABEP concession on the basis that the transfer of control over Venezuelan oil reserves to a foreign power is strictly prohibited under the country’s constitution.As it stands, with Trump still president -- and then provided a like-minded Republican wins the next presidential election -- the opportunities for international oil and gas firms in Venezuela should remain highly tempting. Under the U.S.’s ‘2025 National Security Strategy’ released in December of that year, Venezuela remains a core part of Washington’s three-bloc vision of the world. This comprised China holding the primary role in Asia, while Russia would either dominate or significantly influence Europe, depending on how any future conflict between European NATO members and Moscow unfolds. The U.S.’s direct sphere of influence would be the ‘Americas’ (North and South America), but it will also maintain overall dominance over the other two spheres, according to areas of national interest. According to Venezuela’s interim government, led by President Delcy Rodriguez, the U.S. targets production of more than 1.5 million bpd from the 17 strategic fields over a 25-year term, which would generate more than US$100 billion in investment and US$209 billion in tax revenue for the Venezuelan state, according to her government’s forecasts.By Simon Watkins for Oilprice.comMore Top Reads From Oilprice.comBrent Hits $117 as Tanker Catches Fire in Strait of HormuzJapan to Tap $7 Billion from Government Fund to Subsidize Gasoline PricesEuropean Gas Tops 101 Euros for First Time Since 2022