Energy Dept. draws fire for slow pace of Venezuelan oil deals

Nearly eight months after President Trump predicted U.S. companies would "rapidly rebuild Venezuela's dilapidated oil industry" to boost production, no new petroleum deals have been finalized there with American firms.

• The U.S. Department of Energy is largely to blame, a dozen oil industry professionals, senior U.S. officials and Venezuela insiders tell Axios.

Why it matters: The price of oil is climbing as the Iran war squeezes global supplies, spotlighting the absence of finalized deals in Venezuela — a nation with the highest estimated petroleum reserves on the planet.

• "We have no new concessions. No new deals. It is absolutely a problem," a senior U.S. official told Axios. "The Energy Department is in charge of this and they have some explaining to do."
• The Energy Department and its defenders call the criticisms misleading and unfair.

Zoom in: Developing oil in Venezuela is challenging because of the legacy of mismanagement and nationalization efforts under its two prior socialist strongmen, Hugo Chavez and Nicolas Maduro.

• Maduro was ousted by U.S. forces Jan. 3. Six days later, Trump met with oil industry officials and said the U.S. is "going to be making the decision" about which firms would help "rapidly" rebuild in Venezuela.
• "You're dealing with us directly," Trump said. "You're not dealing with Venezuela at all. We don't want you to deal with Venezuela."

Between the lines: Trump's promise was hampered by two divides — one in his own government; the other in the oil industry.

• The oil industry is separated between major global firms that move relatively slowly and deliberatively, and smaller independent firms — nicknamed "wildcatters" — known for their speed and higher risk tolerance.
• The "majors," like Exxon and ConocoPhillips, publicly made clear they were cool to the idea of going back to Venezuela because of all the uncertainty. But several wildcatters were eager to get in.

Trump's administration, meanwhile, is split between MAGA types and regulatory professionals.

• MAGA loyalists want Washington to heed what Trump said Jan. 9 and force Venezuela's state-run oil company, called PDVSA, to quickly adopt common international industry contracting standards.
• The more cautious bureaucrats in the Energy Department, who have relatively little international oil-industry experience, advocated for a slower process, working more collaboratively with Caracas.
• A new complication: Two earthquakes June 28 badly damaged Venezuela. Discontent there is rising.

Friction point: Trump's former top adviser in Venezuela, Mauricio Claver-Carone, accused the Energy Department of favoring the major oil companies over the wildcatters.

• "Starting January 4th, it should have been carte blanche for all American producers to take risk. That's America First," Claver-Carone told Axios.
• "Instead, American wildcatters got stuck with onerous conditions and a competitive disadvantage versus the mostly foreign majors that were in bed with Maduro."

Over time, more wildcatters aligned with MAGA and officials at the White House's National Energy Dominance Council. They clashed with the more cautious bureaucrats in the Energy Department.

• "NEDC was there early advocating for the wildcattters. But Energy is really turf-obsessed. And Energy won. The problem now is that they own this," said one oil industry insider.
• In recent weeks, State Department officials stepped in to urge Venezuela's acting president, Delcy Rodriguez, to sign more contracts with wildcatters, teeing up deals that could be finalized by month's end.
• One industry official raised concerns that some of the imminent deals might involve newly formed companies with no track records, no balance sheets and potential links to China or corrupt Caracas insiders.

The other side: Energy Department officials say they've advocated for legitimate U.S. wildcatters and they've worked to improve Venezuela's hydrocarbon law to give U.S. firms more access.

• "The Energy Department continues to work with Venezuelan officials and American energy companies of all sizes to unleash Venezuela's resource potential, and we are delivering," department spokesperson Ben Dieterich said.
• Alex Cranberg, a wildcatter with Colorado-based Aspect Energy, said officials are "drinking from a fire hose" in Caracas, trying to manage the demand and keep scammers out.
• Bill Armstrong, owner of Texas-based Armstrong Oil & Gas, said the Energy Department and PDVSA officials are "working hard behind the scenes" to reorient the industry.

Behind the scenes: Two other independent companies shared documents with Axios showing that, for months, they asked the Energy Department to force PDVSA to recognize standard international high-risk contracts for oil drilling, but not enough was done.

• "We're months behind. We'd be lifting oil now if we got half the deference the majors got," one wildcatter told Axios.
• "The problem isn't that Energy is doing too much in Venezuela — it's that they're doing it for the wrong customers," said a representative of another oil firm. "Put the wildcatters in the fields and production shoots up straight away."

For weeks, White House officials have fielded industry complaints as well as requests that Secretary of State Marco Rubio take over the portfolio from Energy Secretary Chris Wright.

• Rubio has deferred to the Energy Department's expertise, partly because many firms want the U.S. government to "pick winners and losers" by favoring one company over another.
• The major companies, meanwhile, are battling to redevelop some of the same fields, according to the Wall Street Journal.

By the numbers: Venezuela produces about 1.2 million barrels of oil today. That's slightly above the 1.1 million barrels daily it was producing before Trump instituted a blockade-like quarantine in November and then seized Maduro to start the year.

• At its peak, Venezuela produced about 3.4 million barrels daily in 1998. The following year, Chavez took office and oversaw the deterioration of the industry.
• If the regulatory floodgates had opened on Jan. 4, estimates vary as to how much oil production would increase —from hundreds of barrels daily to hundreds of thousands.

White House spokesperson Taylor Rogers said the Energy Department "is ushering in unprecedented investment in Venezuela to restore its energy infrastructure."

• She added that the department "continues to facilitate productive conversations between oil companies and the Venezuelan government to unleash its abundant resources, which benefits both the American and Venezuelan people."