US Snags Massive Oil Deal with Venezuela, But Can It Meet Demand?

The US government has announced what it's calling the 'biggest oil deal in world history' with Venezuela, securing as many as 65 billion barrels from its oilfields.

The deal doesn't involve buying oil directly from Venezuela but rather making the Pentagon a 35% passive shareholder in North American Blue Energy Partners (NABEP), a private company led by Venezuelan businessman Alejandro Betancourt. NABEP holds rights to 17 oilfields and will invest close to $100 billion to lift Venezuela's output above 1 million barrels per day.

Venezuela sits on more proven crude oil reserves than any country, with roughly 202 billion barrels, but its production has been lagging due to 'chemistry and money' issues. The country's oil is heavy and sour, requiring diluents like naphtha to move it through pipes, adding about $15 a barrel in costs.

American refineries are running at near-full capacity, making it difficult for new oil supplies to be processed efficiently. President Donald Trump recently asked refinery executives why they're not building more refineries, and the answer was that owning one is extremely profitable but building a new one isn't due to the long lifespan of these assets.