Chevron to Invest $7 Billion in Venezuela, Doubling Production

U.S. energy giant Chevron CVX 2.38%increase; green up pointing triangle said it would invest more than $7 billion in Venezuela over the next five years, doubling its production in the country’s oil fields following a major push from the Trump administration.

The company on Wednesday said the deal adds two new heavy oil fields to its Petroindependencia joint venture with state-run Petróleos de Venezuela. The fields are in the Carabobo region, in Venezuela’s Orinoco belt. Chevron has three existing joint ventures with PdVSA in the country and is the only big U.S. company active there.

“Our expanded position reflects our confidence in the country’s deep resource potential and its ability to compete for investment within our portfolio for decades,” Chevron CEO Mike Wirth said in a statement.

The Wall Street Journal reported last week that Chevron was nearing a deal to make a big investment in Venezuela, which is home to some of the world’s largest proven oil reserves.

Executives from several other oil-and-gas companies are expected to sign production deals in Caracas later Wednesday, according to people familiar with the matter. U.S. Energy Secretary Chris Wright is in Venezuela to announce those agreements.

The deals are separate from the one President Trump announced last week to secure control of a big chunk of the Latin American country’s oil reserves.

Chevron’s deal will see its output in Venezuela rise to 600,000 barrels a day. It is currently producing nearly 300,000 barrels, up some 15% this year. Output costs are expected to come in at $20 a barrel, the company said.

The two new fields are “greenfields,” a term for underdeveloped fields that typically lack infrastructure or electricity.

The updated terms for the company’s joint ventures with PdVSA are expected to be substantially more favorable to Chevron, which the company sees as mitigating its level of risk for investments in the country, according to people familiar with the matter.

Venezuela’s oil industry fell into widespread disarray following years of mismanagement during the regimes of Hugo Chávez and Nicolás Maduro.

Since ousting Maduro in January, Trump has pressed U.S. oil companies to invest heavily in the country, part of an effort to boost Western Hemisphere production and secure more heavy crude for American refineries.

Oil companies have been wary, however, saying they would need security guarantees and sweeping changes to Venezuela’s legal and commercial framework before committing significant capital. Some have spent months negotiating with Venezuelan officials for access to a limited number of oil fields, largely outside the direct involvement of the U.S. government.

Before now, those talks have produced little in the way of major new investment. Venezuela’s oil output has also barely budged, with the country pumping about 1.1 million barrels a day, roughly in line with last year.

Chevron’s two closest rivals, ExxonMobil and ConocoPhillips, are expected to remain on the sidelines for now. Chávez nationalized Exxon and Conoco’s assets in 2007—and they are still seeking billions of dollars in restitution almost two decades later.