Venezuela Oil Deal Sparks Concern Over High Production Costs

Venezuela's oil deal with the US has raised several concerns about its viability. The deal, announced by President Donald Trump on August 28, would put 65 billion barrels of recoverable oil in Venezuela under majority control of the United States.

The oil is located in the Orinoco Oil Belt, but it's mostly undeveloped and consists of heavy, tar-like crude that's expensive to produce. The current production amounts to just over 1 million barrels per day, which would require significant investment to reach a break-even price of $80 a barrel on key greenfield sites.

The deal also involves the US taking a 35% stake in North American Blue Energy Partners, a company run by Venezuelan businessman Alejandro Betancourt. The Pentagon's Office of Strategic Capital intends to structure the investment through penny warrants, which could be controversial in both countries.

Some experts have questioned the feasibility of the deal, citing concerns about Venezuela's nationalization of oil assets and the country's interim president holding power on an interim basis. Chevron has stayed in Venezuela, but other companies like ExxonMobil have been cooler on the country due to its unattractive investment prospects.