US Oil Firms Sign Production Deals With Venezuela's PDVSA in Houston

American oil companies started signing actual contracts with Venezuela this week. Not memos. Not intentions. Contracts.

Oilfield-services giant SLB and independent producer Hunt Oil Co. signed agreements with Venezuela's state-run PDVSA on Tuesday, according to Venezuela's Oil Minister Paula Henao, who confirmed the deals in a Houston interview on state television. One agreement covers production enhancement at two oil fields. The other, with SLB, is a framework deal for reservoir studies across the country, according to Bloomberg.

Henao didn't give dollar figures. But Politico reported ahead of the signing that several more independent U.S. producers were expected to ink similar deals with PDVSA at the same Houston event, according to three people familiar with the plans cited by Yahoo Finance's James Bikales and Ben Lefebvre. The ceremony was originally set for Tuesday evening and may have slipped to Wednesday morning, one of those people said.

The Trump administration set this in motion back in January, when U.S. forces captured Nicolás Maduro and installed his former vice president, Delcy Rodríguez, as acting president. Top administration officials traveled to Caracas in late April to lock down memorandums of understanding. Those talks stalled for months over dispute-resolution terms and Venezuela's own catastrophe: two earthquakes in June that killed thousands and wrecked infrastructure, according to Yahoo Finance.

Rodríguez is now pitching capitalism to the diplomats who once got Chávez-era lectures on imperialism.

In her first state of the union address, delivered in a 44-minute speech that Breitbart notes was a sharp break from Maduro's marathon anti-American rants, Rodríguez called for opening PDVSA to foreign capital and told the diplomats in the room to carry that message home to investors. She framed oil revenue as the way to fund two new sovereign wealth funds, one for health care and one for infrastructure, both of which are in rough shape after 25 years of Chavismo mismanagement and now a natural disaster on top of it. Breitbart reported that Venezuelan hospitals are so stripped bare that patients are told to bring their own syringes and surgical screws.

She also kept a portrait of Maduro and his wife on display behind her podium and called the U.S. operation that removed him a "stain" on the relationship. That's the needle she's threading: welcome American money, criticize the American method that got her the job.

Secretary of State Marco Rubio pushed personally for this. According to Yahoo Finance, Rubio engaged directly with Rodríguez's government to argue that ramped-up oil output was the fastest route to earthquake recovery. An industry source told Yahoo Finance the message landed: "There's a renewed acknowledgement from Delcy that increased oil production is the pathway to rebuilding after the earthquakes."

The reform that made these contracts possible: Rodríguez's government dropped the old rule requiring PDVSA to hold a majority stake in joint ventures. Claire Jungman, director of maritime risk and intelligence at Vortexa, told CNN that "private companies can now operate fields directly, hold bigger stakes, and keep more of the profit."

The numbers back up that the sanctions relief is already working. Venezuela exported 28 million barrels of crude last month, up almost 69% from a year earlier, according to Vortexa data cited by CNN. More than half of those barrels are now headed to the United States, up from roughly a quarter before January, because Gulf Coast refineries are built to handle Venezuela's heavy, viscous crude.

David Goldwyn, who runs the consulting firm Goldwyn Global Strategies, told Yahoo Finance that independent producers, not the supermajors, will likely drive "Venezuela's primary source of new oil growth for the next couple of years."

Not everyone is convinced this is a sure bet. CNN's coverage of an industry event in London captured both the enthusiasm and the hesitation. Greig Gilbert, chief executive of Apertura Energy, told a room of roughly 200 industry insiders that "the time is now" for Venezuela, but he also acknowledged decaying infrastructure, political uncertainty, and the earthquake aftermath as real obstacles. A separate CNN headline referenced skepticism from oil executives who called the country flat-out "uninvestible."

That skepticism is a fair concern worth taking seriously. Venezuela's oil infrastructure sat under sanctions and neglect for over a decade. Contract enforcement in a country run by a government that just months ago was firmly anti-American carries real legal and political risk. Human rights groups, according to Breitbart, have only verified a fraction of the prisoner releases Rodríguez has publicly claimed, raising questions about how much her government's public statements can be taken at face value.

Still, the money is showing up anyway. SLB and Hunt didn't sign framework paperwork on a whim. Politico's reporting suggests more independent producers are lined up behind them.

The open question is how much oil actually comes out of the ground and how fast. Henao gave no production targets tied to the SLB and Hunt agreements. Venezuela Energy Week, a larger investor conference, is scheduled for October in Caracas, where the scale of this bet will get tested in front of a much bigger crowd than the one at Tuesday's Houston signing.