Ten days after I argued that Venezuela had reopened its oil sector without creating the durable rights required for major investment, the Trump administration announced an agreement involving 17 Venezuelan oilfields that Caracas says contain about 65 billion barrels of oil. Venezuela says the project could attract $100 billion in investment. Under the announced structure, the US government and an unnamed private operator in Venezuela would form a new company to develop the fields. The United States is expected to receive 55 percent of that company’s effective output through a combination of an ownership interest and rights to purchase oil at cost, although the division between those two mechanisms has not been disclosed.
President Donald Trump has described the agreement as giving the United States control over the reserves, while Delcy Rodríguez says Venezuela retains sovereignty over its natural resources. The text of the agreement has not been released, leaving the precise structure of the arrangement unclear. It is therefore too early to know whether it will produce anything close to that scale of investment.
The announced structure uses direct sovereign involvement to reduce risk around a selected group of assets. That is a different mechanism from the legal reform Venezuela has spent this year implementing across the petroleum sector.
Venezuela’s January hydrocarbons reform expanded the role private companies can play in the sector and gave investors several protections they had sought. The implementing regulation added more detail in July. Yet the new framework still leaves important rights exposed to Venezuelan administrative discretion, while American sanctions rules determine whether many transactions can be performed, financed, paid, or enforced.
That was the central issue in The Oil Exists. The Investable State Does Not. A company evaluating a multibillion-dollar project has to assess the durability of the contract, the Venezuelan administrative rights that give the contract economic value, and the American permissions that allow the transaction to operate. Those systems overlap, and each can change on a different timetable.
This case suggests an extension to Governance Warfare: the distinction between terrain repair and terrain bypass. Terrain repair improves the wider system in which activity takes place. In Venezuela, that would mean predictable allocation rules, durable American permissions, a settled creditor framework, enforceable dispute-resolution procedures, and investment rights that remain reliable through political succession. Terrain bypass instead creates a protected route for particular activity through an environment that remains uncertain. Governments can do this through sovereign guarantees, special investment regimes, dedicated financial vehicles, or direct participation in a transaction. When that protection is concentrated around a bounded group of assets, it creates what I mean here by an investable enclave.
Since publishing The Oil Exists, the American permissions layer has already changed again. On August 27, OFAC removed the requirement that certain contracts with the Venezuelan government or other blocked persons entered under several Venezuela general licenses be governed by US law, citing investment-related reforms made by Venezuela since January. Those contracts must still place dispute-resolution proceedings in the United States, the United Kingdom, France, or Singapore. That is terrain repair: it removes one source of legal friction across the wider market, while leaving the other Venezuelan, American, creditor, and succession risks largely untouched.
The 17-field agreement follows the other path. Washington would acquire a direct economic claim on production, while American purchases are expected to supply the Strategic Petroleum Reserve and the military. Those interests give the United States a reason to preserve the project beyond the continued validity of an OFAC license. If that additional sovereign backing attracts substantial private capital, the agreement will show how selected assets can become easier to finance before the wider investment environment reaches the same level of durability.
The agreement also changes Washington’s position in Venezuela’s wider petroleum market. OFAC would continue to determine which Venezuela-related transactions are permitted under US sanctions, while the US government would have an economic interest in the new company’s production. Washington would therefore be both a gatekeeper and a participant. Companies outside the 17-field structure whose activities require US authorization would continue to depend on permissions from a government with a direct stake in one part of the market.
The agreement was negotiated privately and without a competitive process, and the companies that would operate the fields have not been publicly identified. Washington is expected to have a role in selecting the operating model and participating companies, while Venezuelan legal specialists are questioning how the arrangement fits within the country’s legal framework. The migration of existing petroleum contracts into that framework also remains incomplete.
The duration of the arrangement is itself unclear. Rodríguez describes a 25-year bilateral project, while a US official told the Associated Press that the new company received rights to untapped oilfields for 100 years. Until the agreement is released, it is impossible to know how those two periods fit together or where the longer right sits within Venezuela’s new hydrocarbons framework. For an arrangement intended to reduce long-term investment risk, that difference is consequential.
Separate company-level negotiations provide a comparison. Chevron was already in advanced negotiations to migrate and expand its Venezuelan joint ventures before the new bilateral deal was announced, while India’s ONGC said earlier in August that it expected to sign agreements to operate two Venezuelan oil blocks under the new petroleum law. ONGC had also secured a company-specific OFAC license allowing it to resume full operations in Venezuela.
Their terms and subsequent investment decisions will test whether Venezuela’s broader reforms can support durable commitments without the unusual sovereign structure surrounding the 17 fields. Relevant signals will include the scale of committed capital, the form of the agreements, the treatment of dispute resolution, the durability of US permissions, and whether companies move beyond preliminary rights into investments that require long-term confidence in the underlying asset.
Three outcomes are now plausible. If allocation becomes more transparent, dispute-resolution rules become clearer, American permissions become more predictable, and ordinary projects begin attracting long-horizon capital, the enclave may help Venezuela move toward a more conventional investment environment. Major investment could instead remain concentrated in assets receiving special sovereign protection, leaving the wider institutional problem largely intact. A third possibility is that the exceptional structure itself expands and becomes an important channel for new investment. Rodríguez has already described plans to develop eight additional greenfield blocks as part of the wider energy expansion.