Chevron’s $7 billion Venezuela bet faces scrutiny over Pentagon oil stake

Chevron's confirmation this week that it will invest more than $7 billion over five years to more than double its Venezuelan output to about 600,000 barrels per day appeared at first to be a straightforward corporate announcement. Two days later, however, it looks like something more: the first market test of a US government structure with no clear precedent — a Pentagon office created to support defence technology now holding a 35% stake in a private oil company controlling a fifth of the world's largest proven reserves. Chevron's engineers will determine whether the additional barrels materialise. Whether the framework behind the investment can survive is now being debated in Washington, Caracas and by former officials who helped establish the office.

The announcement was made on Wednesday at a signing ceremony at the Miraflores Presidential Palace in Caracas. Energy Secretary Chris Wright oversaw agreements valued at what he described as tens of billions of dollars between Venezuela and Chevron, Italy's Eni and GE Vernova, alongside acting President Delcy Rodríguez and Petroleum Minister Paula Henao. It was Wright's first visit since January's military intervention removed Nicolás Maduro from power. Chevron said it had been assigned additional acreage in the Orinoco Belt, where its Petroindependencia venture will expand into two adjacent areas in Carabobo. The company put total production costs at less than $20 per barrel and said output from its three joint ventures had already risen 15% this year. Current production is about 280,000 barrels per day, with the target of 600,000 barrels per day set for 2031.

Chief executive Mike Wirth was unusually direct about what had changed. Speaking to CNBC in Caracas, he said the interim government's new hydrocarbon law, which changed taxes, royalties and other conditions, had moved Venezuela from "not being very competitive" among Chevron's options to being "very competitive versus our options around the world". In the company's own statement, Wirth thanked the administration — and Wright in particular — for helping create conditions for investment. The candour is significant because it places Chevron's decision squarely within the policy framework built by the Trump administration after January, rather than outside it.

The announcement came days after the White House disclosed the structure of what Trump called the biggest oil deal in history: a joint venture with North American Blue Energy Partners, a private company led by Venezuelan businessman Alejandro Betancourt. Under the agreement, Rodríguez granted NABEP 100-year rights over 17 oilfields holding proven reserves of 65 billion barrels — roughly one-fifth of Venezuela's total reserves. The deal was signed by Defence Secretary Pete Hegseth and Secretary of State Marco Rubio. In a parallel move timed to Wednesday's announcement, the Treasury Department's Office of Foreign Assets Control issued additional sanctions relief for companies operating in Venezuela's energy sector.

The deal's most striking feature is the Pentagon's direct ownership position. The Office of Strategic Capital holds a 35% equity stake in the company, while the State Department has separately been guaranteed the right to buy 20% of its output at cost, along with a right of first refusal on the remainder. The White House described the arrangement as coming "at zero cost to the American taxpayer". It said the government would have veto power over board appointments, that a majority of directors must be US citizens and that the agreement is governed by US law.

The precise legal mechanism has not been fully disclosed. The Wall Street Journal reported that the stake would be structured through penny warrants, an instrument that grants ownership without requiring a large upfront investment. Pentagon chief spokesman Sean Parnell disputed that description. The White House has not clarified which account is accurate. No formal congressional authorisation has been identified, and the fact sheet does not address the authority under which the arrangement was established.

Scrutiny of the office itself has intensified since the announcement. A former OSC official told Semafor that taking equity stakes was never the intention when the office was created. While that was not necessarily a problem in itself, the official said it raised legitimate legal and ethical questions. Jon Hillman of the Council on Foreign Relations wrote that the deal "feels like uncharted territory", noting that the office's mission had been to expand private investment in critical supply-chain technologies for national security. Semafor described the arrangement as the riskiest move yet by an office established to provide loans for critical technologies. Its stated aim is to make Venezuelan oilfields more attractive to US investors while keeping Chinese and Russian companies out.

The political response has been sharper still. Senator Jack Reed of Rhode Island, the senior Democrat on the Armed Services Committee, called the Pentagon stake "a blatant abuse of power and taxpayer dollars". He argued that the administration had removed Maduro, supported the unelected leadership that replaced him and was now using US military assets to extract Venezuela's oil. Criticism has also come from officials who helped develop the policy that led to Maduro's removal. Elliott Abrams, who served as the Trump administration's special representative for Venezuela during the campaign to oust Maduro, wrote in a Washington Post opinion article this week that the new oil arrangement amounted to a "shameful sellout" — a deal giving Washington a stake in Venezuela's oil while strengthening interim President Delcy Rodríguez's hold on power. Inside Venezuela, some opponents of Rodríguez have called the agreement an "asset grab" and questioned its legal basis. Lawmakers from both parties are seeking legal details and oversight, while the administration says it will clarify the arrangement's authority in due course. Former US government energy advisers have warned that future administrations in either country could challenge or unwind the terms.

The Pentagon's direct equity stake in a producing oil company has no clear precedent in modern US history. The Defence Department has long maintained strategic reserves and influenced energy policy through procurement, but a 35% ownership position — structured through a venture involving a foreign government operating outside its own constitutional framework — marks a significant departure. Venezuela's Constitution requires National Assembly approval for contracts of this kind with foreign governments; that approval was not obtained. A senior administration official argued that the partnership is with a private entity, not a foreign state, and that maintaining stability during the transition requires working within existing structures.

Whether the infrastructure can support the ambition is the central question for analysts. Venezuela's oil sector is in severe disrepair after decades of mismanagement, the nationalisations carried out under Hugo Chávez in 2007 and years of US sanctions. Production peaked at nearly 3.5 million barrels per day in the late 1990s. Recent estimates put national output at about 1.25 million barrels per day, although figures for the months surrounding the January intervention fell as low as 800,000 barrels per day. NABEP itself produces between 160,000 and 200,000 barrels per day. The fields now assigned to the company were previously controlled by Russian and Chinese firms, which left infrastructure in varying states of deterioration. Betancourt's company has committed to investing $100 billion in new infrastructure, although the timeline and financing have not been detailed. Analysts broadly agree that restoring production will take years.

One technical constraint has attracted little public attention. The administration has said the State Department's 20% purchase will be used to replenish the Strategic Petroleum Reserve. But SPR facilities were designed for light crude with an API gravity of 30 to 40 degrees and low sulphur content. Orinoco production is predominantly extra-heavy crude, typically below 10 degrees API and with high sulphur content, making it physically incompatible without upgrading or blending. Congress must also approve purchases for the SPR. The Energy Department has not publicly addressed the mismatch.

Chevron's confidence is not shared across the industry. ExxonMobil, which rejected Chávez's joint-venture demands in 2007 and had its assets seized, has shown no interest in returning. Chief executive Darren Woods described Venezuela as "uninvestable" at a White House meeting in January, and an Exxon spokesman said this week that nothing had changed. ConocoPhillips has not indicated that it plans to re-enter the country. Trump suggested on Monday that other major oil companies were preparing to follow Chevron, but there is no evidence of that. Halliburton is separately in talks to deploy equipment and personnel under the new framework, according to people familiar with the matter — a sign that the services supply chain is beginning to take shape even as significant production gains remain years away.

The geopolitical implications extend well beyond Venezuela. The 17 fields handed to NABEP were, in the White House's own description, previously controlled or operated by Russian and Chinese companies. The transaction is therefore not only an energy deal but also a deliberate effort to displace two of Washington's main strategic competitors from a resource base they had developed over many years, in a country the US now effectively controls. Russia and China have not publicly responded to the specific transfers, although both condemned the January intervention and do not recognise Rodríguez's interim administration.

The congressional dimension adds further friction. Democratic lawmakers launched an investigation in January into communications between the administration and major oil companies — including Chevron, ExxonMobil, ConocoPhillips and Continental Resources — around the time of the military operation. The inquiry is examining whether oil interests influenced or preceded the decision to intervene. Trump effectively addressed that question in advance when he told reporters hours after Maduro's capture that the US would "keep the oil".

For Chevron, the calculation is more straightforward than it is for anyone else involved. The company never left Venezuela, absorbed the political risk of operating under sanctions and has now been rewarded with expanded acreage and improved terms in the world's largest proven reserve base. In Wirth's own words, it has also tied its investment to a legal and political structure that critics in both countries are already challenging. Whether 600,000 barrels per day by 2031 is achievable is a question for Chevron's engineers. Whether the framework behind the investment can withstand legal challenges, political change and the weight of its own ambitions is a question the coming months will begin to answer.

Originally published on HNGN