Exxon, ConocoPhillips Seek Safeguards to Return to Venezuela

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(Bloomberg) — Exxon Mobil Corp. and ConocoPhillips are pushing for durable contract terms and a way to resolve billions of dollars owed to them as they consider re-entering Venezuela after exiting the country two decades ago. 

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Both companies are in active negotiations with President Delcy Rodríguez’s government about tapping Venezuela’s vast oil reserves. While they’ve recently said Venezuela has more work to do on production-sharing agreements and other matters, the companies are privately encouraged by the willingness of Rodríguez and her advisers to negotiate different aspects of the contracts, according to people familiar with the matter. 

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An Exxon team met with US embassy officials in Caracas recently and had discussions with Venezuelan officials in Houston, some of the people said. Earlier this month, Chief Executive Officer Darren Woods said Exxon is studying how to apply its expertise in Canadian heavy oil to Venezuela’s crude, which has a similar high viscosity. 

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The political push from both Rodríguez and US President Donald Trump to restart production represents a once-in-a-generation opportunity for the oil majors to tap into one of the world’s largest sources of crude unaffected by the conflict in the Middle East. Chevron Corp., unlike its US rivals, stayed in Venezuela through the late President Hugo Chávez’s nationalizations and years of US sanctions. It is now in prime position to quickly grow production as crude is trading for about $100 a barrel.

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While ExxonMobil and ConocoPhillips don’t want to miss out, they’re wary of what may happen if the political situation changes, either in the US or Venezuela, some of the people said. 

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For Venezuela, getting Exxon and ConocoPhillips back in the country would signal a clear move toward economic stability, opening a path to more investors.

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“Bringing back Exxon Mobil and ConocoPhillips is a top priority for the government, and they’re putting a lot of resources and effort behind it,” said Carlos Bellorin, an executive vice president at Welligence Energy Analytics. “But for either company to seriously consider returning, the deal would likely need to be very attractive.”

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ConocoPhillips said in a statement that it’s evaluating opportunities in Venezuela, including gathering data and engaging in discussions with “relevant stakeholders.” 

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“As with any potential investment, decisions will be guided by a range of factors, including economic and policy stability, safety, adherence to the rule of law and market competitiveness,” the company said. “Any decision to proceed would need to take into account mechanisms to recover the debt that is owed.”

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Exxon declined to comment.

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One of the most critical issues is whether the companies can structure their investments in such a way that they can avoid losing billions of dollars if they were nationalized in the future. Global oil producers typically insist on stability clauses that mean contracts can’t be unilaterally changed by successive governments when negotiating major deals to enter new countries. They also routinely insist on settling any disputes through international arbitration proceedings rather than local courts.