President Trump sat down recently with the heads of the major, US headquartered, international oils–ExxonMobil, Chevron and ConocoPhillips–for what it seems he anticipated would be a love fest/bidding war for rights to develop Venezuelan oil.
He was told the obvious, instead, that Venezuela is “uninvestable” as things stand now.
How so?
A quick Google search would show that the selling price of a barrel of comparable grade to Venezuela’s, i.e., thick like tar and full of sulfur, is about $45. A two-minute discussion with someone from the Energy Department would presumably reveal that the all-in cost of lifting a barrel of Venezuelan crude to the surface is ~$80. (“All-in” here means not only someone with a bucket at the wellhead pouring oil into a 42-gallon container. It means the cost of geophysical mapping of the fields; planning and actually drilling wells; and providing storage facilities, pipelines, trucks and roads to the ports. Another few minutes would make it clear that although all this infrastructure existed in Venezuela at one time, very little is there now. My guess is that knocking down/hauling away the old stuff and building new will be more expensive than simply starting from scratch.)
An analogy:
Imagine two hotels. Hotel #1 is in midtown Manhattan. It’s newly-constructed, with has large rooms, great views, a Michelin-starred restaurant. Park Avenue offices and Fifth Avenue shopping are nearby. Hotel #2 is in a warehouse district. Construction is shoddy. The rooms are old, small, and roach-infested. There’s no internet, phone service, restaurant or nearby transportation. Crime in the neighborhood is high.
In both cases, the daily out-of-pocket cost of operation is probably not that different from one to the other. The cost of cleaning a room is probably around $20 and then there’s the customer-facing staff. Breakeven is at maybe 30% occupancy.
But the situations are totally different. For hotel #1, having a new owner is more or less a question of changing the sign on the door. For #2, it may be cheaper in the long run to demolish the old structure and build from scratch. Even so, the location may set a low cap on what daily room rates can be.
Gemini just told me that Forbes and The Economist estimated in 2022 that it would take $250 billion to restore Venezuelan crude operations to their previous good health.
My question: how could anyone with all the information sources of Washington, or even anyone just with Google, not know this?