NPR’s A Martínez speaks with Francisco Monaldi, director of the Latin America Energy Program at Rice University, about President Trump’s claims of a Venezuelan oil agreement.
Transcript
A MARTÍNEZ, HOST:
Let’s get a view of President Trump’s claims about this Venezuelan oil agreement from Francisco Monaldi. He’s the director of the Latin America Energy Program at Rice University’s Baker Institute and a leading scholar on the economics and politics of energy in the region. Francisco, so President Trump says this agreement will lower gas prices. Will it?
FRANCISCO MONALDI: In the short term, it’s very unlikely that it will lower gas prices. In the longer term, if Venezuela produces much more, it will lead to slightly lower oil prices, which would help with gas prices. But just to give you an idea, Venezuela is going to add 300, 400,000 barrels per day of production, and the disruptions in the Middle East are about 10 million barrels of production. So it is a drop in the bucket comparatively.
MARTÍNEZ: So for anyone that needs to fill up their gas tank today or tomorrow, the prices will pretty much stay the same. Nothing’s going to change there.
MONALDI: Very little, is the likely answer.
MARTÍNEZ: OK. So for – you know, for years, we’ve heard about how vast Venezuela’s oil reserves are. How true is that?
MONALDI: Well, you know, Hugo Chavez forced the official figures to be overestimated by using a recovery rate from the oil, the extra heavy oil, that Venezuela has from the real figure, which was between seven and 8% to about 20%. So most experts believe that the reserves are close to a third of the official reserves.
MARTÍNEZ: So it’s a matter of how much we can actually get, how much oil can actually be extracted, as opposed to how much is actually there.
MONALDI: Correct. I mean, there are vast resources there. The thing is that it’s costly and difficult to extract. And so none of the oil that is down there can be considered an oil reserve.
MARTÍNEZ: So for the oil that can be gotten, how long is it going to take to develop the oil fields at Venezuela to put oil on the market? Fifty-five percent of oil from this venture is going to go to the United States, according to the administration.
MONALDI: Yeah. Well, these are 17 different fields, and most of them are what we call green fields, meaning they don’t have any infrastructure. They have to be fully developed. That will take a long time. We’re talking about three, four years to start production. But some of the smaller fields are already in production, and so we can expect some increase in production in the next few years, perhaps, 200,000, 300,000 barrels per day. But it’s not, as I said, something that will be that significant.
MARTÍNEZ: From what you’re understanding, how is this going to work? The United States doesn’t have a national oil company that could be a partner in this deal. So, I mean, how do – how is this going to work? How are they going to actually get the oil?
MONALDI: Well, details are still to be understood, but we are seeing – we are hearing two very different, you know, details about the deal. On the one hand, the Trump administration says a hundred-year lease in which the United States will have – will partner with a local businessman, apparently, and they will give loans and help financing, and then they will get 55% of the oil. On the Venezuelan side, what we’re hearing is this is the regular contract that Venezuela gives, which is a production-sharing contract in which the national company hires an operator – so the operator doesn’t own the reserves – and it’s for 25 years instead of a hundred. So very different details. But still, we need to understand how is this partnership going to work and, in particular, why the United States is partnering with this individual who has, you know, very close to a regime in Venezuela, who has, you know, a history of murky deals in the past.
MARTÍNEZ: We’ve just heard that Venezuela’s acting president, Delcy Rodriguez, says this is a win for Venezuela. Do you think it’s a win for the Venezuelan people?
MONALDI: It could be if in the – first, if we understand the details and Venezuela does get a relevant share of the revenues. So far, it seems that it’s about 30% of the revenues, which is sort of on the lower side. But it is true that it’s very hard to get companies to invest in that very risky environment. So if this leads to much more significant investment and higher production, yes, it could benefit the Venezuelan people. The question is, wouldn’t there be a better alternative with, you know, a democratic government and a better deal with lower risk for the top oil companies of the world to really invest?
MARTÍNEZ: So one thing really quick. So considering you just said that it’s not going to help people that need gasoline tomorrow, as – terms – with lowering their prices, but filling up the United States Strategic Petroleum Reserve, do you think that is a viable long-term solution for this?
MONALDI: Well, this might help, but, you know, the strategic reserve usually is light oil, which the U.S. has plenty, and Venezuela is heavy oil. So it’s not clear why this would be a great way to fill the strategic petroleum reserve.
MARTÍNEZ: Francisco Monaldi directs the Latin America Energy Program at Rice University’s Baker Institute. Francisco, thanks.
MONALDI: Thanks.
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