There are many reasons to be skeptical of the Trump administration's announcement that the U.S. will develop Venezuelan oil.
The Trump administration says America will develop a vast amount of Venezuela's oil reserves and with the U.S. taking a majority stake. President Trump says it's, quote, the "biggest oil deal in the world." But as NPR's Julia Simon reports, energy experts say there are many reasons to be skeptical.
JULIA SIMON, BYLINE: Here's what we know about the deal. An official who was not authorized to speak publicly told NPR that the U.S. government was entering into a new private joint venture with a private Venezuelan company. The Trump administration says the U.S. would get 55% of the oil from the joint venture. That's equivalent to about 65 billion barrels of oil that's under the ground in reserves. But on the ground are where the doubts begin. Here's Gerald Kepes, president of Competitive Energy Strategies, an energy consultancy in Washington, D.C.
GERALD KEPES: The question is, who's going to operate on the ground?
SIMON: The U.S. official tells NPR there's a private Venezuelan company involved, but it's still unclear how this partnership will work. Unlike Saudi Aramco in Saudi Arabia, or Pemex in Mexico, the U.S. government doesn't own its own oil company.
KEPES: We don't have a national energy company or a national oil company.
SIMON: Kepes says other American oil company investors might want to take a portion of the U.S. government's stake, but what we know about the deal suggests there will be complications with that, too.
PAASHA MAHDAVI: It's not clear who will rush in for that opportunity.
SIMON: Paasha Mahdavi is professor at UC Santa Barbara who studies the oil industry. He says this particular deal likely won't appeal to many foreign oil companies. That's because Trump has announced that the United States would take its stake of Venezuela's oil, quote, "at cost." At cost means here that the United States would get that oil at whatever it costs to produce plus some set margin. But there can be a lot of volatility in oil markets. When oil prices are really high, oil companies can make a lot of excess profits. This kind of at-cost deal can take away oil companies' ability to make those extra big bucks.
MAHDAVI: At cost is not attractive in this industry. So you would want to have some ability to capture on whatever premium exists between cost and the actual price of oil.
SIMON: Kepes says there's another issue with this deal, and that's the fact that it's being made with the government of acting President Delcy Rodriguez. She wasn't elected. She came into office after the U.S. seized former President Nicolás Maduro.
DELCY RODRIGUEZ: (Non-English language spoken).
SIMON: Last night, Rodriguez made a speech about the new deal. She emphasized how this is good for the Venezuelan people.
RODRIGUEZ: (Non-English language spoken).
SIMON: "This agreement is based on a very simple premise," she said, "each party contributes what it does best." Still, many Venezuelans are already questioning if the deal's terms are fair. Oil companies will also have questions, Kepes says.
