Venezuelan Oil Output Deals Could Redirect Tanker Flows Eastward

The tanker market may see an increase in West-to-East export flows in the coming years, driven by a new 65 billion barrel agreement between the US and Venezuela, according to shipbroker Gibson, as reported by Hellenic Shipping News Worldwide.

Gibson stated that the US has finalised a deal to control 65 billion barrels of Venezuelan oil reserves in partnership with North American Blue Energy Partners (NABEP). NABEP, currently producing approximately 250,000 barrels per day (kbd), is set to receive concessions for 17 oil fields with proven reserves of 65 billion barrels for a century. The US Department of War’s Office of Strategic Capital holds a 35% equity stake in NABEP’s parent company, while the US Department of State is guaranteed 20% offtake at production cost from NABEP's current and future fields. The US also retains a first right of refusal on the remaining 80% of production. NABEP has outlined a plan to invest up to $100 billion in new oil infrastructure to scale production.

Separately, Chevron secured additional acreage in the Orinoco Belt, adjacent to its existing operations, with plans to invest over $7 billion in the next five years to double its production to 600 kbd. Eni also finalised a deal to manage the 35-billion-barrel Junín-5 field, aiming to increase its current 12 kbd output to 400 kbd with an annual investment of $1.5 billion.

Production Forecasts and Destination

The Trump administration expects a material increase in production early next year, with Energy Secretary Chris Wright anticipating 1.5 million barrels per day (mbd) by mid-2027, up from the current 1.1 mbd. Gibson noted that this increase is considered achievable with experienced operators like Eni and Chevron. However, the shipbroker questioned the certainty and timeframe for NABEP’s investment plans and the attraction of other international operators to the region. Goldman Sachs does not expect production to exceed 2 mbd in the next few years due to the required investment scale.

Regarding the destination of this incremental production, Chevron and Eni are expected to direct their equity crude to their respective refining systems, primarily in the US and Europe. While NABEP’s production could theoretically be sold anywhere, the US’s guaranteed 20% offtake and first right of refusal on the remaining 80% suggest it will be a key recipient. Secretary Wright indicated that the barrels could be used to refill the Strategic Petroleum Reserve (SPR).

Implications for Tanker Routes

Gibson acknowledged the current oil market’s inefficiencies, making short-term tanker market conclusions difficult. Logically, the US is projected to absorb the majority of initial Venezuelan production increases, with European equity holders sending cargoes to their own refineries. Over time, however, incrementally more volume is likely to head East as US refiners' appetite for heavy sour crudes is met. Since 2013, US imports from Venezuela have not surpassed 650 kbd, and overall heavy sour crude imports to the US have fallen from 1.8 mbd in 2013 to 750 kbd last year.

The shipbroker indicated that increased Venezuelan supply could displace heavy sour crude imports from the Middle East to the US, although these stood at only 60 kbd last year, limiting the impact on tankers. Ultimately, Gibson concluded that the primary impact would be an increase in the Atlantic crude surplus, supporting incremental export flows from West to East. This shift could also help offset any reduction in US crude exports once SPR refills commence.