Venezuela Under Remote Control: The Capture of Maduro and the Future of Global Oil

Welcome back to another episode of the Oil Ground Up podcast. I'm your host, Rory Johnson. A reminder to hit subscribe and leave us a review. If you have any questions of us and any feedback on the show, please drop us at a like at Oil Ground Up at clearcommodity.net. Oil Ground Up is distributed in partnership with the clear commodity network at clearcommodity.net and also the oil and glass global network, the leading podcast network for oil and gas. Venezuela and President Nicolas Maduro is currently sitting in custody in New York, indicted on a litany of narcoterrorism, drug, and gun charges. He was captured alongside his wife in a weekend raid by U.S. forces in the opening days of the new year. Now, U.S. President Donald Trump has announced that Washington is "in charge" of Venezuela and its vast oil reserves, and plans of American companies revitalize the dilapidated industry. What any of this historic development means for Venezuela, or for the United States to that matter, remains a wide open question. What today I wanted to reconnect with Venezuela's oil industry expert, Dr. Francisco Menaldi, to discuss these latest developments and what they specifically mean for the global and Venezuela oil industries. Dr. Menaldi is the director of the Latin American Energy Program and the Wallace S. Wilson Fellow in Latin American Energy Policy at the Center for Energy Studies at Rice University's Baker Institute for Public Policy, and joined us for an update to our excellently timed conversation from mid-November, which I encourage you to check out in the show notes if you missed at the time. And, Francisco Menaldi, welcome back to the podcast. Obviously, for those that haven't realized or have been watching the news, it's been an extraordinarily busy start to 2026 on the Venezuelan file, and our episode we had with you Francisco back in November turned out to be extraordinarily well-timed and prescient, I think, along a whole bunch of different narratives and trajectories here. But I'd like to just kind of start by, for those listeners that didn't catch that first episode, first I would recommend go back and listen to it. But for those that didn't listen to it, could you just quickly reintroduce yourself and kind of how you come to following Venezuelan oil industry? Sure. So I was born and raised in Venezuela. I then came to the U.S. to do my great studies, went back there, and founded a Center on Energy Studies at the top business and public policy school, Yesa. And then I came back to the U.S. again, I've been in the Harvard Kennedy School and now for a decade at Rice University's Baker Institute as the director of the Latin American Energy Program. And so, even though I worked throughout the region, of course, I still have a significant focus on Venezuela. Yeah. And I think I've followed your work, particularly across the energy space, but particularly on Venezuela and Latin American energy issues for more than a decade now. So you've been my kind of go-to for ages. But just to kind of go back and rewind a couple of weeks now, you wake up Saturday morning. And I'm sure like, just like me, you look at your phone. And the news is that Nicholas Maduro has been captured by U.S. forces, is en route to the United States to San Trial. And now kind of what's happened since then has been this progressive and bewildering, I think, in many different ways, kind of show of strength, a show of at least performative strength from the White House, say, you know, Trump now saying that he controls Venezuela, controls Venezuela's oil. So talk me through kind of what was racing through your mind that Saturday morning and kind of how things progressed over the next couple of days. And I have so many questions, you know, where we stand now, but I just kind of curious to see how you processed the information. Because when we talked in November, this was one of the scenarios, but it was a fairly tail risky and kind of extreme scenario, I think, reasonably at the time. But now we're in that world. So talk me through kind of how you felt about time and kind of how things progressed over the coming days. Sure. As you point out, I mean, I don't think many of us expected exactly how it happened. We all thought that, you know, the escalation of U.S. pressure to Venezuela would, you know, continue and might progress into some type of military action, but the flawless sort of operation in which they took Nicolas Maduro and his wife, which is an important part of the equation because she was a very powerful individual out of the equation and to face drug charges in New York, but left the rest of the regime sort of relatively intact. And at the same time, willing to, as we will talk about, acquiesce with the United States to a degree that was a very hard to predict in the past. It is a really shocking turn of events and talking in two ways. Of course, the fact that they were able to do this without almost any, you know, no damage to U.S. troops or equipment, some civilians did die in Venezuela, but most of the people affected were, you know, the people protecting Nicolas Maduro or some others related to their anti-aircraft facilities, for example. And so by the way, one of the interesting sort of factors that confirm what we knew was that the 32 Cubans, the elite Praetorian Guard of Maduro died during the operation which illustrates the first lack of trust that he had on the Venezuelan military, but also the influence that Cuba does have in Venezuela and that might be one of the important variables that might be changing. And of course, also, you know, very quickly, we learned something else, which was that the Trump administration had decided not to pursue anyone else or to, you know, try to push for regime change, but basically deal with the vice president of Maduro, Belcero Rodriguez. And basically try to sort of rule by remote control, Venezuela, by using still the pressures of the naval blockade plus, of course, the threat of additional military operations to basically force them to accept a variety of policies and decisions that the Trump administration wants them to be, you know, to basically implement. And so that is something that I don't think, you know, was pretty much, you know, expected that to exactly follow this pattern. Yeah, so I think there's a couple different ways we can progress here. I'm going to try and just go chronologically because I think we, you know, it's been two weeks and so many things have changed over the course of that two weeks. So let's start with, so pretty quickly after, Delsey Rodriguez was, was installed, was kind of appointed as the interim president. I think we can just say president now, I think, for lack of a more clear kind of constitutional or electoral mechanism, she is now the president. What, who is Delsey Rodriguez in this scheme? So she was Maduro's vice president and I think importantly in this equation, oil minister. So talk to me about who she is, what she represents. And if nothing had happened so far, like if, if you were, if this was a month ago and someone said to you, Maduro dropped dead, heart attack and Rodriguez is now the president. What do you think at the time that would have meant, not regime change, which is a different figurehead? What changes the situation there in your mind? Sure. So, Delsey Rodriguez is an interesting character along with her brother, the president of the National Assembly, Jorge Rodriguez, which is her older brother. And because they are the, they are siblings, their parents, their father was a guerrilla leader in Venezuela that was involved in the kidnapping of an American businessman during the 1970s and he was captured and tortured to death. And so, they, since then, have been seen as sort of a symbol of the leftist, you know, movement in Venezuela that was repressed during the democratic years. And Hugo Chavez took them as sort of a symbols of the revolution that he wanted to pursue. And Jorge was very influential as an advisor to Hugo Chavez. Delsey, for a while, was his secretary of the presidency, but they fought and he fired her and she never came back to the government. But she was reinstated by Maduro as a significant player eventually becoming his executive vice president. That is, by the way, in the Venezuelan constitution, but it's appointed by the president, it's not an elected position. And so, she constitutionally, you know, had to take cover, but the Supreme Court already said that she doesn't have to because if the president is fully absent, the constitution says that in 30 days, they have to convoke an election. And of course, as you would imagine, the Supreme Court doing what she wanted them to say said, "No, the president is not absent. You know, he's still the president, he's just not here." So in this case, it's actually the acting or interim president is actually quite important for Delsey legally. Exactly. Because otherwise, you will have to convoke elections if the president, for example, if he had dropped that, as you mentioned, there was no way he would, I mean, they were harder to justify that if that he was around. But I think it's also important to notice the following, she had become the architect of sort of some of the liberalizing policies on the economic front of Maduro. She brought some economies that had worked for Rafael Correa, the president of Ecuador that were more pragmatic than the people that Maduro had as economic advisors. And they basically helped her bring hyperinflation down, try to open the old sector. And in fact, Delsey and her brother were the architects of an idea of normalization of iterations with the U.S. that was supposed to happen in 2024 with a Biden administration. But of course, after they basically committed such a blatant fraud, because things didn't turn out as they expected that they could steal the elections in a sort of more traditional way and not basically even able to present results, that basically eliminated the re-approachment that she had tried to implement with the Biden administration. But she also became very close to the Venezuelan private sector. She started negotiating with the bondholders or companies, particularly during the timing with the Biden administration allowed for that. And so she became a person that was considered a pragmatist, some even call her a moderate. But I think that we have to differentiate those two levels. She, without a doubt, is a pragmatist in the sense that she's a survivor. She knows how to stay in power. And if that requires being much more pragmatic economically, she will do it. But she's by no means a moderate in that she and her brother are probably among the most leftist of all the government coalition and the more committed to the idea of a revolution. And I think least likely to be willing to give up power to the Venezuelan opposition. So I think it's important to keep those two things at the same time in mind. And by the way, I think that also shows what could happen in Venezuela if in the long term they are they stay in power. But they don't feel the same types of pressures that they are facing today. I think they will in some ways revert to more political control like for example the Cuban regime has done many times in the past, they become pragmatic if they needed to survive. But they they of course privilege an ideological but also much more importantly a political control approach. So obviously kind of staunchly leftist from a domestic kind of political constituency perspective, you know, almost permanent revolutionary. But I think in the in the international scene now kind of pragmatic in this relationship with Trump personally in the kind of Washington more broadly. So getting kind of specifically to the oil market impacts here. The first thing that so just to kind of contextualize where we are right now. We have this so there was the blockade, you know, as of you know, no vet October, November, it kind of started to firm up and went from Venezuela went from exporting around roughly a million barrels a day give or take to basically nothing, you know, by the end of the year, little bit leaking out for Chevron shipments to the US Gulf Coast that were under this, you know, OFAC license that that way of the that way of the sanctions. But the rest of the the rest of the industry kind of brown to a halt. That put additional huge pressure as basically you couldn't get crude out of the country. You started overflowing domestic storage tanks. You started getting reports that Peter Vesa was was shutting in upstream production across the country, basically, you know, very familiar for those that are familiar with the western Canadian industry that when you run out of egress, you kind of need to shut things in because you can't put it anywhere forever. So that was a situation coming into this. So at the beginning of 2026, the beginning of the year, Venezuela and industry, basically almost nothing was getting up to the global market, pressure over time was building and forcing shut-ins on on the industry. Then Trump nabs Maduro, you get Delcy in the presidency and all of a sudden Trump starts basically saying, we're going to turn around the entire industry. And the first bit of that is this 30 to 50 million barrels that Trump has claimed was quote, turned over by the Venezuelan government. So I'm calling his blockade kind of pirate booty of, you know, stolen, functionally stolen oil. I mean, it's this open question of whether or not it's still I think a fuzzy line. I think we're going to talk a lot about this about the, you know, how much is Washington brokering on behalf of Venezuela, this resale of oil to the global market versus how much of this is just being kind of almost empirially extracted from the Venezuelan people as kind of, you know, tribute to the Trump administration or something. So I think there's this question of, first of all, the 30 to 50 million barrels. What are they? Where did they come from? What's the timing that we're talking about here? Was this just what was floating around waiting as the blockade is include barrels that have already, that escaped the blockade that are kind of, you know, lingering in China? What are those barrels and kind of how do they fit into the picture? Yeah, I think the figure of 30 to 50, you know, fit with the, I mean, the 30 million barrel figure is close to what the storage capacity of Venezuela is today, you know, onshore. And of course, as you point out, there were a lot of barrels floating in the sea, some in Venezuelan territorial waters, but some of them, a few of the tankers actually were able to live Venezuela. And then there were, you know, plenty of other on way to the black market in China or already there sort of waiting to be sold. So I think the figure is probably closer to the lower bound, maybe it's between 30 and 40 million barrels that they can sell right away. Of course, you know, it's not that you have a domestic marketing in Venezuela. You do produce a refine about 200,000 barrels per day, so not all of that will be exported. And Venezuela has to sort of reopen the production to get back to the number of, you know, 950 to a million barrels that it was producing before the blockade. And so, so, but, but of course, from the perspective of the US, the US was important before the sanctions are a little bit north of half a million barrels from Venezuela, mostly in the Gulf Coast. And that was, just to clarify, that was in 2018, before the kind of 2019 Petevesa sanctions, not the latest, not the latest round of kind of reimposed. Exactly. And a little bit before that, by the way, just a few years before, for a few years, Venezuela was exporting about 800,000 barrels per day. Then as you point out, there was the zero barrels during the period 2020 to 2022, then the licenses of Biden get back that number to around 300,000 barrels, which is not only Chevin but a little bit of Repsol and Vitol exporting to the US, then it goes to zero again for a short period of time because of Trump's new sort of revoking the the chevron license. And then it goes back up but not to the previous levels because they only allow them to export half. So they were exporting about 130, 140,000 barrels. So now what we are, you know, the idea is that most of the barrels of Venezuela that were being exported to the black market in China, about 80% of Venezuela and exports were going to China, a black market are going to be rerouted to the United States. It's unclear, you know, if they can sell 850,000 barrels, which would be the total sort of exports in the next few months to the United States. And we have seen a little bit of pragmatism because they seem to be saying that they will allow some barrels to go elsewhere. So basically for now, Trafigura and Vitol have been given licenses to sell that oil and the money so far has been deposited in an accounting, the Qatar National Bank, that it sort of controlled by the Trump administration. So as you point out, what we're seeing now is that basically Venezuela has accepted that they will not try to export barrels to the black market. In fact, they have the now some tankers trying to evade the blockades, which is amazing. Because of course, some of these tankers were already loaded and ready to go and some of them had prepaid part of the oil to pay the basis. So it was an interesting situation in which you have a lot of sanctioned tankers, for example. What are they going to do? They're going to come to the US and they're going to give the oil back to Venezuela. So fascinating situation. But bottom line, I expect that most of the barrels in the future are going to come to the US. That will be, of course, that Venezuela has to steal some of the market of Canadian, Mexican, and maybe the worst, not steal, but gain the market share of those from those producers and, of course, give some relevant discounts in order to gain that market share. But as I said, I do also expect that the US will be pragmatic and if needed, they will allow sales perhaps to Europe and to India. And perhaps even to China, you know, there were a few barrels that didn't go to the black market, but did go to serve the debt of China about 50,000 barrels per day. So the Chinese, of course, are very eager to continue getting their debt service. And so they might negotiate with the Trump administration that. And finally, Rory, I think it's fascinating because the Trump administration claimed at the beginning that they will completely control every single dollar on that account. And that some of the things that they said they will use them for were imports from the US to Venezuela. And the other one was to rebuild the Venezuelan electricity grid and generation with US companies. But so far, the only thing that we have seen is that the $500 million that were licensed to get into that Qatar account are being sent to Venezuela and private banks in order to be sold in the Venezuelan currency market. And Venezuelan importers, as of actually today, are buying those dollars and are going to be able to import whatever they want. And the only sort of limitation so far is that these importers have to have a swift account. So basically, they have some level of compliance because they have to pass through the US banking system. So that shows a level of pragmatism that some didn't expect, because Rubio had emphasized many times. The regime is not going to get their money to do whatever they want. It's going to be closely micromanaged by the US government. But that's not what's happening right now. Of course, that shows that they are privileging that the economy grows. Because if they didn't send that money back very soon, Venezuela will be the inflation was skyrocketing, the currency was the value. Because the government basically didn't have much revenue during the last month or so. Yeah, basically a complete freeze out of all hard currency, which causes all these issues with attempt to import anything. We'll be right back after the short break. Hey, everyone, Trevor Hall here, host of the Mining Stock Daily podcast and CEO of Clear Commodity Network. If you're looking for timely interviews, sharp market commentary and straight shooting insight into the mining and metal sector, Mining Stock Daily is the show for you. We cover the latest mineral discoveries, company moves, and the macro forces shaping global metals markets every trading day. Now we're part of the Clear Commodity Network bringing you trusted voices across the entire resource and commodity landscape. You can find Mining Stock Daily on your podcast network of choice and at clearcomodity.net. Clear commodity network, digital news on the physical markets. I'm Rory Johnston, host of Oil Groundup and founder of commodity context. If you enjoy how we're all about digging in and providing more context here on the podcast, you'll love my newsletter research service, commodity context. Subscribers can expect a mix of real-time event analysis, data reviews, and deeper thematic research, as well as the oil context weekly marker report every Friday. If that sounds like your kind of edge, head to www.comodicontext.com or find us on substector, join for free or go deeper with paid. And now back to my conversation with Dr. Francis Guminaldi. I think there's one thing I really want to focus on here at this point, which is this question of where the oil goes. Because I think there's this open question of before, the prior, the pre-Miduro departure norm, pre-block aid norm was like your saying, 80% of roughly a million barrels a day going to China. A little bit less because remember that Venezuela imports about 100,000 barrels, but consumes domestically a little bit north of 200,000, so the net takes you to about between 850 and 900. So yeah, and so the bulk of that lion share of that was still going to China. Now in this current reality, over at least over the basically year to date, over the first two full weeks of the year, virtually all the oil that's departed, we had a little bit to want to China, as you noted, but mainly it's all going to the US Gulf Coast or to staging grounds in Curacao or elsewhere in the Caribbean. This is at $500 million that I believe was basically 50/50 between Traficura and V-Tall in terms of remarketing these barrels, and now these barrels are kind of landing for this staging and export elsewhere. I think that question here becomes lucky because as you noted, prior to the 2019 clampdown, Venezuela was exporting roughly, ballpark, million and a half barrels a day, only a third of which were going to the United States. So one, I think it proved that that showed that left to its own devices the market wouldn't put 100% of the Venezuelan exports into the US Gulf Coast, all else equal, that they're for optimization reasons, for kind of other optionality reasons, the barrels flowed elsewhere. So I think one of the earliest and I think the most important questions is when you resume kind of pre-blockade export levels, let's say we can get back there in a couple of minutes or a couple of months. Will those barrels be heading, will they be freed to go anywhere? Or will the sanctions relief be structured in such a way that basically forces them into the US Gulf Coast market? Because I think this changes the impacts on global pricing, or at least specific benchmark pricing considerably. As an example, if all those barrels were forced into the US Gulf Coast market, you're going to have additional kind of, call it non-market driven, excess pressure on, say, Western Canadian select barrels that make it all the way down to Houston. And we already have seen that basically WCS differential is a Houston. As of November, we're sitting around $4 a barrel under WTI. They've widened to about $8 a barrel under WTI now. So there's already some kind of immediate, visible pressure that's kind of mounted on Canadian barrels at the Gulf. But I think there's still this open question. I've been chatting with Canadian crude traders about like, okay, what is the level of competition expected? Because I think that if it's just this question of they're allowed to compete again, then yeah, you would expect incremental competition of the US Gulf Coast. But one, at some point that differential makes Canadian barrels more attractive again, and they went out and then Venezuela and barrels go elsewhere. But if they're forced, if Venezuela is forced to go into the US Gulf Coast, you need additional discounting on Canadian barrels to then finance the re-export economics to, let's say, India or wherever else. Basically, the other areas that these Venezuelan barrels would have gone, then you would basically force the reshuffling that those, that demand is then satisfied by Canadian re-exports of the US Gulf Coast or Mexican Maya exports or whatever else. So I think the one question is, how are you thinking about? You kind of mentioned that you expect most of these to go to the US Gulf Coast. Is there a reason that's the case as what we've seen so far? Or is it just that kind of, because I agree, when you hear the president, when you hear President Trump speak, and Orubio speak for that matter, they kind of always phrase it as all of this oil is going to go to the United States. But then even at this, you know, gathering of oil company executives, which we're definitely going to talk about, at the White House, I guess it was last Friday, two Friday's ago. Trump also said that, yeah, China can buy the barrels as they can buy as many barrels as they want. They're not going to get the same discounts they were getting before, which is obviously going to reduce the demand, but that comment may seem like it would be a fairly free trade in Venezuela and barrels. So how are you parsing the volume of kind of contradictory statements on this? Yeah. Well, as I mentioned, that that's similar to the example of how will they use the money from the account, right? So you can expect that there is going to be more pragmatism than the statements that say it will only be sold in the United States, and as you mentioned, there have been contradictory statements that they would allow some others to buy. And so I do expect some oil to flow elsewhere. However, I do expect that they will try to sell as much as possible in the US to pressure down prices to improve refiners margins in the US and to try to reduce domestic price of products in the US, and also just for the view that Trump is getting Venezuela's oil. And of course, these days, Canada is not particularly favored in the Trump administration. So it's not like they will be concerned about hurting Canadian producers at other points in time they might have. So I do expect that, and by the way, you're right that in the past, a lot of barrels were going elsewhere that was not the US, but notice that part of those were being sent to China. I'm talking about pre sanctions like in 2016 to '18 because Maduro and initially Chavez wanted to diversify away from the US and also the Chinese had given loans to Venezuela by billions of dollars and they had to be repaid. So the barrels going to India were more completely market oriented because going to China had some political component to them. So I think Venezuela would, you can think of a figure that it's closer to the 800 to 900,000. Of course, it depends, as you perfectly know, on the sort of the relative prices and availability, of course, Maya experts to the US have the client in the meantime. So I think there is some room for Venezuela to sell most of the oil in the Gulf Coast, particularly if the Trump administration has a preference for that. But I also expect some degree of pragmatism not pushing it so far that the discounts will have to be too large. Yeah, and I think just again for the listener awareness, based on my numbers, you see somewhere in the ballpark of a million and a half to two million barrels a day of heavy sour WCS, Maya, Mary level crew consumed in pad three in the US Gulf Coast. So I think that kind of shows that there is room here, it's not like Venezuela can completely itself tap out or satisfy satiate US Gulf Coast heavy market, like there's going to be additional things there. But to this point, if there was additional kind of non-market pressure to push those barrels into the US Gulf Coast, because I think to your point, I think it's very reasonable. I think on like a straight line interpretation, it would make sense that yeah, if Trump wants to get some kind of preferential kind of pump price balance out of this, he's going to do that. But I think that's the one we start to like run to a bunch of like devils in the details questions. Sure. So like how do you, again, let me just kind of throw a couple at you, like how do you picture that kind of direction would be communicated. So like let's say all these barrels are being marketed by Trafigura and Veetal, which is so far what's happening. Is that kind of like, if you get that deal, if they paid $500 million for these, you know, I'd say roughly $10 million barrels give or take, are you kind of like told as part of that deal, like wink, wink, nudge, nudge, like sell it for a $2 differential weaker in the US Gulf Coast versus elsewhere, like how do those trade our decisions make, you know, fall out? And then on the flip side, like it's going to, even if you did do that, you would privilege and kind of bolster US Gulf Coast for finding margins, but given that there's free trade in products, there's no necessary reason that that would then go in like actually translate to lower pump prices in like Texas, because any of that would just get arbred away alternatively. It's all of these kind of like it's always this mind of like you picture what how Trump views the market and how he understands things and what that understanding would cause decisions to be made, and then you, you're like, okay, but then I understand the market. What would those weird decisions that were made for weird reasons? What impact would they have? And that's what I'm still trying to trace out is like, how does any of this actually sort itself out? And what are the natural points of kind of like, how does this system automatically balance on the flip side? Like, can you give any sense, there aren't good answers in fairness. Like how are you thinking about how this could even work out practically? Yeah, you point out to a lot of the uncertainties. I think some elements, some additional elements here are that, and Chevron is going to be allowed to export their, so you're mentioning about the stock that they are going to sell now. But Chevron is going to be able to export the 250,000 that they are producing per day. Then you will probably have a rep sold and others also exporting to the US according to their own contract. And then I get this back to this kind of 3, 350,000 holiday pretty quickly. What we were in January of 2025. Exactly. Something like that. And of course, the rest is likely that it's, at least in the short term, is very expedient that Trafigura and Bidol are going to be marketing those. But as you point out, what is the instruction that they are going to be giving these two companies? I mean, there is a lot of room here for opaque things to happen, right? And of course, one way would do it to do sort of auction the virus with a certain rule that, basically, if you want to sell all in the US, well, of course, you need to give a bigger discount. If you want to sell 80% whatever, and as you point out, this gets very quickly to a situation in which then Mr. Trump says on TV, hey, the prices are at the pump are not going down despite the fact that we're selling. So what are these refiners doing? We have seen that kind of talking in Latin America, Presbyens love to interfere with markets, right? And so that's a sleeper's love. But I'm not sure about how they will manage this sort of pragmatism in terms of the, or for example, would President Trump like to use this as a bargaining chip with other countries? Like, for example, remember that he was very adamant in pressuring India, not to buy Russia oil, and the Indian said to him, well, but you are not allowing us Iran, Russia and Venezuela, come on, right? And so maybe to alleviate the pressure to the Indians, if they want a pressure to Russia, they can allow reliance to buy the, say, 300,000 barrels that they used to buy in the past. And of course, that so plenty of interesting possibilities and a lot of potential discretion here, because in the end, it would be the US government telling these trading companies and perhaps, you know, the other players like Trevor, what they want, how they want this to be executed. Yes, as you said, I think there's, we're in this, I keep phrasing this, we're in this new, people keep talking about this new world order, but I think that the new market order is that more and more of these flows are being driven by just, even prior to this, I think that the market had become over the past couple of years ever more increasingly non-market driven, like non-commercial driven driven by discretionary policy action, et cetera, et cetera. And I feel like this is just another lurch down that direction of like, you know, what's being produced is not being decided by the market, it's being decided by OPAC, or it's being decided by the White House, it's being decided, and now it's like not just what's being produced, but where those barrels are flowing is increasingly a decision based on vibes, I guess. Like, however the President wakes up and feels like he like wants to give, you know, modia, you know, a carrot in India, well, you can have a quarter million barrels a day of Venezuelan Mary flow, I guess, is like the way we're in now. So moving, I don't want to dwell too hard on some of the unknowable stuff. So I'm going to move to the even more unknowable stuff, which is the longer term. And I think when we spoke a couple months ago, I think we're in this world of all of these long term, how long will it take Venezuela to produce X, how much money will it cost? As you will know, these are like the definition of fuzzy numbers of like, there's a big range. And I think when we discussed and what you see elsewhere in media over the past couple of months, people have been talking and yourself as well have been talking about somewhere between 50 and $100 billion and five to 10 years to get to, quote, rebuild Venezuela's oil industry. But I think given the immediacy of what we're talking about now, I think it's valuable to try and pull that apart a little bit and kind of say, so first of all, from what level to what level? So like, let's say, I think in the immediate near term, there's going to be a bit of a juicing of the gains because of this base effect. Obviously, Venezuelan oil production is down substantially over the past couple of months, exports down even more. So there's going to be a bit of this moment of like, I have no doubt the White House is going to claim like, ah, we've increased Venezuelan production by a quarter million barrels a day. It's like, well, sure, but you kind of, you were the ones that reduced it by the quarter million barrels a day in the first place by the blockade. So let's say getting back, let's say starting from the starting point of November. So let's say a million barrels a day, nice round numbers, rounding for ease. How long? Let's talk about this in terms of two different things. One moving from let's say a million barrels a day to two million barrels a day. And then another from going from two million to three million. And I think the all time high Venezuelan production was early 1970s, I think was 3.7 million barrels a day. Second peak in the late 90s, around 3.3, 3.4. Now we're sitting at, and then I want to say in 2015, you're looking at like a decade ago, you're looking about two and a half. Now it's more like one. So those are kind of rough benchmarks. So talk me through kind of what can get done in the next 18 months and what would it cost and require the next kind of three to four years and then the longer period. So I'm like parameterized to the extent possible. Sure. Another way, like should we think about certain areas of low hanging fruit, let's say some of cheffron's operations, what needs, like what would be, you know, what kind of production gains would require a full refurbishment of the upgrade or fleet that's currently kind of mothballed, what about pipelines, like talk me through like decompose some of that $50 to $100 billion in five to 10 years. Sure. So of course, as you know, there are issues, there are tons of uncertainties as you point out, but there are some things that I think we know more than than others. So, for example, and I think in the short term, you have, of course, the effect of just reopening the wells that were, you know, being shut in because of the closing of production that, so as you point out, we should get back to the level of production that we had in November. And perhaps a little bit higher if you take into account the fact that delueness were a problem, they were important delueness from Russia just during the period of time. They think they allowed one or two cargos from from Chevron, but for their own production. So most, of course, of the production occurs outside of Chevron in the heavy, in the extra heavy. So they were facing limitations of delueness. So that is meant of the limitation of delueness and sort of cheaper delueness coming from the U.S. that will allow for some additional increase in existing fields, right, in existing production. Then you have Chevron, which was already investing, they have the only two oil rigs drilling new wells in Venezuela were operated by Chevron. They are probably going to scale them to four, and that will accelerate the rate of increase. And they can add between 200,000 barrels and maybe a little bit more in the next one to two years. Then can I just poke you on one quick question there, just in terms of increasing the rigs from two to four, are with those additional two rigs, with those already being in country and just not currently mobilized, or are there something that they would need to import? No, there are some, I think there are about ten Western, because there are some Chinese rigs that are in the hands of Pedro Vesa and some Chinese service companies, but those have always been, you know, much less productive and all the time in trouble. So I don't count those, but there are about ten of Western companies, you know, Schlumberger, Rivers and some others, and so Chevron can get some, and because the U.S. lifting sort of or given licenses to service companies, those could be put back into production relatively soon. But as far as I know, the plan is for Chevron to have four, and then probably Repsol might also have one initially. Morel and Pro was trying to bring one for the lake of Maracaibo, so that one, I think it's not the jet in place. So Repsol is probably going to be able to triple production in about a year or two, because they were given some additional areas that used to be operated by Pedro Vesa. And just to clarify, from where to where in terms of tripling? About 30,000 to about 90,000 or so, so not that much in terms of big numbers. But if you add that, Morel and Pro perhaps 10,000 additional barrels, so you're 300,000 among these three companies. Why are these two companies particularly important? Because they all have existing contract, not only of the JV, but they have the parallel contract that Venezuela signed with them, allowing them to control their cash flow and to control the operation. Because remember that on the urban Venezuela law, Pedro Vesa is actually the operator. And they control the cash flow and the exports. And so these three companies have everything ready to, you know, in the case of Repsol and Morel and Pro. They just need to get the license that apparently is just going to be given in the next few days. And Chevron is going to get an expanded license even better than the one they got under Biden. So they will be able to do more. The other thing that I think is important, particularly in the case of Chevron is, notice that one of the big difference between Chevron, Conoco and Exxon is the following, Chevron is in the country, has contracts that one of them for a green field that they are just, you know, increasing production. And so they have everything set. Perhaps they can get a slightly better deal in terms of royalties and taxes, particularly after their debt is paid because so far the deal is, it's a no-brainer for Chevron because they are getting their debt paid at a relatively fast rate. And so they are not risking any additional money in Venezuela so far. They are basically using part of the cash flow and they are getting their debt paid. It's a no-brainer, as I said. Of course, if you significantly increase investment, then you might need to put some fresh cash. And that's, you know, today there is an article about that, I think in the Wall Street Journal, sort of suggesting that Chevron has to manage the expectations of Mr. Trump in terms of how fast they can because they can move because they, of course, don't want to risk too much money without, you know, making sure that the conditions are there for doing that. But Chevron is in a completely different situation than others. In fact, even different than Repsol or Morel and Prom or E&I, which could be the next one, because these other companies have very limited production and so a very limited cash flow and they don't even control their own barrels because, in the end, Peresa has to give the barrels from the general pool of barrels, not their own production. So they are in a separate category. So then, after that, you have the service/production sharing contract that Densy Rodriguez had signed during the period of 2024. Most of those were allocated to cronies of the regime, a couple to more serious companies, including one owned by Rod Luis at Texas, a billionaire. But those are typically very small, the ones that are in sort of declining fields that basically are areas that Peresa used to operate, but they don't have the financial resources, but much less even the technology, et cetera, to really put this production back to increase. And so what is the U.S. going to do with those contracts? Are they going to force Peresa to reassign those contracts away from these cronies into say American companies? That's an interesting question, or they will, or will they be completely pragmatic and let Densy do whatever she wants to do? She's announcing that she will put those contracts are currently not in the law, that she will change the law in this next few days to make them legal. And so this is the changing the law. This is the hydrocarbon law. And then she announced this at the state of the Union, her first day at the Union, right? There was plans to amend or change some of the more, let's call them investor unfriendly, aspects of the hydrocarbon law, things like requiring, paid evasive, to have operational control of all of these assets, like framing or kind of structuring this to be similar to the deal that Chevron has, is that the expectation, let's say over the next year, is that the new standard will be that all companies operating in Chevrolet and that as well will have kind of a Chevron style deal. It's interesting. We don't know the details about what she's going to do, but she has, does has mentioned a few things. Like one is that they, she will legalize this type of, they are called the CPP, the contract of headparticipation productiva, these were not in the law and are a mix of a production sharing with service contracts in which Pedevesa or as JV hire, sometimes the minority shareholder, but sometimes a third party to basically operate the field, it has a baseline production and the investor is paid according to the increase in production with a share of that production. Both those contracts have been seen by some companies in the US, you know, because Secretary Wright of course wants the independence, the wild cutters of the US to think about these opportunities in Venezuela and so far the reaction in Houston is, we don't like those contracts at all. And so, they say Roderieu has to evaluate if she tries to just pass generally the idea of service contracts and then negotiate with the US the details about how these contracts will be specifically designed. Then, what to do with, they are claiming that they will eliminate the taxes different from royalties and the income tax, you know, like Venezuela has a wind fault tax that is highly discretionary and that it's a problem for certain levels of price. And there are other elements, of course the Venezuelan royalty, in particular there is something called the minimum effective royalty that is 50%, that if everything does not together to 50% of the growth revenue that additional sort of royalty kicks. Yeah, the one thing I remember looking at, just trying to parse out some of these details I found an article from S&B Global that listed that they have a kind of a fiscal and royalty competitive framework for oil and gas producers that have out of 111 countries, Venezuela ranked 111, that it had this like deeply, deeply unattractive, heavy, heavy royalties, heavy joint venture requirements, heavy local content requirements, et cetera, et cetera, et cetera. So, this is all the stuff that when when ExxonMobil says Venezuela is quote, uninvestable, much to the President Shagrin, that is what he's referring, that is what Exxon's referring to is these kind of deeply, deeply onerous requirements, right? Exactly. So, they are showing their willingness to sort of make this more flexible, to reduce some of these rates of royalties and perhaps even the income tax. But we don't know exactly what they're going to be willing to do. And also it's unclear how much this is being coordinated with the U.S. because you know this is a weird game in which Secretary Wright and the Department of Energy seem to think that they will set the rules for Venezuela. But at the same time, it seems that there's a lot of things that she will set the rules with some opinion from the U.S. Let's see how this works out. But so, so far, besides the Chevron and Morellum Pro and RepSoul projects, I think we can expect that some of these contracts are going to be either allowed to proceed or will be given a license or will be reassigned or a new type of this type of service/production-sharing contracts will be announced and some American companies might be interested in those. E&I is another company that might get a license to a project that they have. So, all these put together, Rory, I think, we can think in two to three years up to half a million barrels. Okay. But it's very hard to think about more than that. Without other things aligning, because think about it, the bulk of the growth in Venezuela's production would have to be in extra heavy in the Renoco. And these are massive projects, typically, even if you don't build an upgrade there, because of the nature of transporting with diluents and. You need double pipelines, you need all these other things, right? Yeah. Exactly. You need a lot of infrastructure, and even though the projects are not going to be executed like Chavez require them, because he was going to force them to have operators, in the case of E&I refinery, to increase their recovery rates from about 7 to 8% that Venezuela achieves with conventional extraction methods to higher levels. By the way, when people tell you that the break events of Venezuela are 80, they're talking about a 50% Royal D&O with all those fiscal terms we talked about. Exactly. So that's not the relevant number, but let's keep that aside for a second. So bottom line, we need a lot of things to change for the companies to be even willing to think about this massive billion-dollar investment. And that's why, as you pointed out, Exxon was so reluctant. And even Conoco, which is owed $12 billion by Venezuela and has tremendous incentives to go back because of that, just to try to collect some of that, they are, of course, thinking about things like the following. You know, the current national assembly of Venezuela is not legitimate, according to the US. It was a sham election. The, of course, the zero three is not a legitimate president. And there is, I mean, so far, you know, there is no, the law doesn't allow for this contract. And the Venezuelan Constitution, by the way, says that the government needs to control. It uses that phrase, the oil industry. So how it's exactly this going to be, you know, worked around. And of course, you need to know, is this a durable relationship between Venezuela and the US, because if sanctions are reestablished at some point, either by the Trump administration or by a new administration, you know, you are going to be in deep trouble again. So you need, you know, alignment within the US and Venezuela. You need a new institutional framework and you need some level of political stability and consensus within the country of an oil opening, which cannot be fully imposed by the US, because, you know, these things are imposed eventually, you know, in the horizon of an oil investment of 20, 30 years, they're going to be reversed. And so bottom line, I think that those conditions are not there for the big investment. Those, those investments are the ones that the figures of, you know, more than a, a, rice that has more than a hundred billion, I have around a hundred billion and some other expert similar amount to get to, as you pointed out, to the levels of peak levels of Venezuela. By the way, one interesting point that few mentioned or know is that it's true. Venezuela got to 3.4 in the, before Chavez, but Venezuela added capacity of about half a million in those next few years, but they couldn't use it because they were in open quotas. And so Venezuela had almost to four million barrels of capacity that were then destroyed because Chavez destroyed Venezuela. But that, so Venezuela could go to back to four million, but it will take as you point out close to a decade and the issues are, again, not, it's very low geological risk. Cost are not that high. The problems are all above ground, right? I mean, yeah. So I think this is, as you said, this is going to be a very, very long road. I think that this is, I think, a good place to end the conversation for today because I would love to have you back on in a couple of months when we know a lot more. So before we, before we let you go, any kind of final comment on what you're watching over the coming weeks? Yeah. So I'm looking at what are the reforms of the, of the law that they're doing. I'm looking at the, there is supposed to be a delegation of the Department of Energy going to Venezuela bringing some of these wild cutters. And, and, you know, most of these businessmen have never done business outside of the U.S. And that, and that, as you would imagine, is a completely different world. So I do expect that even though the emphasis of Secretary Wright has been on American wild cutters, he will have to find also companies like, you know, Canadian companies that operate in Colombia and in Peru and in, you know, companies that operate in conventional, in Argentina and in Brazil, on shore that are, you know, experts on this type of smaller fields to also, you know, be, to look at these opportunities because these other companies at least have some experience dealing with, you know, countries that are not the U.S. By the way, they expect the calibration of expectations will be, you know, hard because of course, the U.S. is a country in which taxes are low for the oil sector in which, you know, property rights, mineral rights are private, you know, it's such a different operating environment that I think they will have a little bit of a, of a, of a chalk to sort of understand how things work down there. And, and of course, in the end also, is it possible to impose, you know, a legal regime from outside when you don't have, you know, boots on the ground and, and, and, and the long-term enforcement of those rules. So other than the, as you pointed out, low hanging fruit of fields that already have the infrastructure that they just need, these companies to get in for a short cycle investment and they, you know, maybe have, having horizons of five years, it's going to be very hard if all things, you know, don't align for, for the longer-term investment and there are so many uncertainties in the, in the middle. And the other last last point that I want to mention is that another thing to look to build interested is the natural gas potential in next to Trinidad and, you know, Shell and BP are also very eager to, to move those, those projects along. So, and those are the, the, the, the, the two, you know, potential areas beside the, the, the companies that are already in place. Francisco Menaldi, thank you so much for rejoining us on the oil-grounded podcast and helping us understand everything that's going on in Venezuela right now. Thank you very much. The information presented should not be considered investment advice. The clear-come-art network and its affiliates are not responsible for any loss arising from any investment decision in connection with material presented herein. Please do your own research and speak with a licensed financial representative before making any investment decisions.