Bank of America analysts say a reported U.S. initiative to assume control over Venezuelan oil reserves signals a notable reorientation of policy and leaves uncertain consequences for the country's defaulted debt.
According to the reports cited by the bank, the U.S. would take control of 65 billion barrels of oil reserves under a 25-year arrangement that would cover 17 oil fields. The arrangement is described as a partnership between the U.S. Department of Defense and Alejandro Betancourt's NABEP.
The transaction is reported to be structured so that a newly formed private company would channel investment into Venezuelan production. Under the terms outlined in the reports, the U.S. would secure a 55% effective share of output from that company. The deal is expected to draw roughly $100 billion of investment and could enable production that potentially exceeds 1.5 million barrels per day.
BofA kept its own production target intact at 1.6 million barrels per day but revised the timing, moving the anticipated date from the end of 2027 to sometime in 2028. The bank said the market will require time to evaluate the implications of the new operating model.
"The US is said to take control of 65bn bbls of oil reserves. Details are limited, but a major shift is taking place," analyst Anne Milne wrote.
On the question of Venezuela's defaulted sovereign debt, Bank of America described the effects as ambiguous. The bank noted that the initiative could be positive from a production perspective, filling a gap where major oil companies have shown caution. At the same time, BofA said the fiscal return to Caracas is unclear and the proposed production model remains untested.
Bank of America warned of downside risk for legacy creditors should Washington prioritize reconstruction over existing debt claims. The bank also highlighted technical and market challenges tied to the character of Venezuela's primary crude. Orinoco heavy crude, the bank emphasized, is technically difficult and costly to extract and commonly trades at a steep discount to lighter grades.
BofA's guidance reflects both the potential for increased output under the reported arrangement and the uncertainty that outcome creates for holders of Venezuelan debt and for the fiscal position of Venezuela. The bank said markets and stakeholders will need time to assess how the new arrangements could affect production, investment flows, and creditor recoveries.
Additional context from the bank's note:
- The reported plan covers 17 oil fields under a 25-year arrangement.
- The U.S. stake is described as giving 55% effective output of a new private company.
- Projected investment into the sector is around $100 billion, with potential production above 1.5 million barrels per day.
- BofA maintains a 1.6 million barrels-per-day target but delays the timing to 2028.