NYT's Tom Friedman: Our oil companies need a legal structure in order to operate in Venezuela
Speakers
Tom Friedman
— New York Times Columnist
Becky Quick
— Co-Anchor, Squawk Box
Summary
Tom Friedman joins Squawk Box to discuss the U.S. plan to tap Venezuela's oil after Maduro's capture. He argues American oil companies need a legal framework, security, and debt resolution before they can operate there, and that rebuilding infrastructure would take years. He also warns that a push for $50 oil could pressure majors and shale producers. The conversation ends with doubts about Venezuela's political transition and democratic elections.
- Maduro was removed, but Friedman says the underlying corrupt regime remains in place.
- U.S. oil majors need hydrocarbon law, arbitration assurances, security, and rule of law before Venezuela re-entry.
- Rebuilding Venezuela's oil infrastructure could take three years, with only about 500,000 barrels a day near term.
- ExxonMobil and ConocoPhillips have unresolved expropriation claims of $20 billion and $12 billion.
- Trump's reported aim for $50 oil is near break-even for shale and problematic for major oil companies.
- Friedman compares the Venezuela risk to Libya and stresses free elections for long-term investment.
- Investors are raising Venezuela funds, but Friedman says amounts are far short of estimated needs.
Ideas
Venezuela re-entry needs legal structure first.
Trump's plan to bring major U.S. oil companies into Venezuela is unrealistic without a legal structure: companies such as Exxon, ConocoPhillips, and Chevron need a new hydrocarbon law, assurances of international arbitration, security, and the rule of law. The corrupt regime remains in place, infrastructure repair would take about three years, only about 500,000 barrels a day can be achieved near term, and oil companies will be very wary given political whipsaw risk.
$50 oil pressures major oil companies.
A $50 oil price target is very problematic for major oil companies because it runs against their economic interests; they have global opportunities and must report to shareholders, even as Trump may want lower gasoline prices for the midterms.
Shale producers hurt by $50 oil.
Trump's political interest in pushing oil down to $50 a barrel to lower gasoline prices before the midterms is close to break-even for shale drillers and could put some shale producers out of business.
