Chevron's $7 billion bet on Venezuelan oil

U.S. oil supermajor Chevron is taking the plunge and investing big in Venezuela. The company announced a $7 billion investment over the next five years in the country. Chevron plans to more than double its oil production in the country to 600,000 barrels a day.

In its announcement, Chevron called this deal a “turning point” for energy in Venezuela.

“So, it's a pretty significant investment for Chevron, but also, more importantly, it's the largest investment so far by an individual company in Venezuela,” said Bob Fryklund, vice president and chief strategist for the Upstream Energy Group at S&P Global Energy.

Fryklund said that Chevron will build on the company’s existing operations in the country.

“This makes a lot of sense for them to continue to grow an asset that they already had and have had for decades,” he said.

But other supermajors — like ExxonMobil — might be hesitant to follow.

“It makes less sense for some of the other companies, because they would be starting from scratch almost,” he said.

Chevron has more security than a new entrant into the country, per David Goldwyn, president of Goldwyn Global Strategies.

“My guess is that we will see a lot of those companies look at potential opportunities in Venezuela, maybe identify fields that they might [in] the future be interested in operating,” Goldwyn said.

But they will slow roll those decisions — Venezuela remains politically risky.

On the other hand, Goldwyn said the world is going to need oil for decades.

“In a market where we are looking at long-term risk to the Strait of Hormuz probably never returning to the flows that we saw before the president started this war,” he said. “We may need to replace that supply from other countries.”

Having more of that oil come from the Western Hemisphere is a good thing, Goldwyn said.

It could come from Venezuela, but it doesn’t have to.