Venezuela’s crumbling oil infrastructure

0:28Good morning from the Financial Times.

0:35The U.S. plans to control Venezuelan oil sales indefinitely. U.S. Energy Secretary Chris Wright announced this yesterday, just days after the capture of Venezuelan President Nicolas Maduro. We're just going to get that crude moving again and sell it, just like we did in our businesses. First, this backed up stored oil, and then indefinitely going forward, we will sell the production that comes out of Venezuela into the marketplace. Wright also said the U.S. would funnel the proceeds to American banks and open up Venezuela to American oil companies. And of course, in the long run, create the conditions that the major American companies that were there before, maybe that weren't there before but want to be there, will go in.

1:17The resources are immense. This should be a wealthy, prosperous, peaceful energy powerhouse. Venezuela's state oil company, Peta Vesa, said yesterday that it was in negotiations with Washington to sell volumes of crude oil to the U.S. It said the arrangements would be similar to those currently in place with international companies like Chevron.

1:45Now, this push by the Trump administration to control Venezuela's oil industry, it's not exactly going to be easy. There have been years of neglect that have wreaked havoc on Venezuela's oil facilities. And there is a lot of catching up to do. Here to talk about that is the FT's energy editor, Malcolm Moore. Hi, Malcolm. Hi there. So what kind of deterioration are we talking about in Venezuelan oil infrastructure, Malcolm? Just, you know, how bad is it? You can tell the story straight away just by looking at Venezuelan oil production. This is a country that used to be a major, major producer of oil over three and a half million barrels a day back in the 1970s.

2:24And today it is producing less than 800 ,000 barrels of oil a day. There's just degradation everywhere. They don't have the equipment they need. They don't have drill rigs. We looked at satellite imagery of some of the storage facilities in particular. So Venezuela is facing a problem at the moment that it's running out of storage for its oil. We found images of tanks that were either half full or totally empty or just rusted away, had never finished construction. We know that the pipelines are seriously degraded. We know that from leaked reports from Venezuela's own state oil industry. This is going to take tens or hundreds of billions to fix.

3:08Malcolm, how has Venezuela gotten to such a state that it needs this kind of massive overhaul and repair? Majority of people believe that the problems began when Hugo Chavez took power back in 1999. And in 2001, Chavez passed a law basically nationalizing all of Venezuela's oil industry and saying that private companies could not be involved in the oil sector. They had to set up state-controlled joint ventures in order to take part. And under his regime, the assets of companies like ExxonMobil and ConocoPhillips were seized and nationalized. Eventually, there were U.S. sanctions brought in. And at that point, Venezuela ceased to be able to get a lot of money for its oil.

3:55It's been selling it to basically small Chinese buyers at a heavy discount. So all of this points to basically just not having the money to invest in the oil sector. And that's where you see this sort of very steep tail off in production. So then what needs to happen in order for the U.S. to come in and save the industry as it says it wants to do? For U.S. companies to feel comfortable in Venezuela, firstly, they're going to want to see that there's rule of law. There's probably going to have to be changes to those laws brought in by Chavez to enable them to set up in the country in structures that they feel comfortable with.

4:34When they invest, they're investing on a 20 to 30 year horizon. The second thing is Venezuela is going to need a lot more technical expertise. The people I spoke to said that 8 million Venezuelans have fled the country. All of those people, the expertise that they had in running oil fields, they're going to have to come back. But again, a lot of the Venezuelans I've spoken to have been quite confident that if those two things happen, then actually they were quite optimistic about the future of Venezuelan oil. It would just take a lot of investment and it will take a lot of time. Yeah, estimates have it coming in at like$100 billion or more to get to peak production levels.

5:14How realistic is that? So analysts basically say there are two different things that will happen. In the short and medium term, companies will come in and oil fields that are already operational can be optimized and improved. But in the long run, they say those huge reserves that Venezuela has, they're going to need to be tackled with a lot of new facilities going to have to be built. A lot of drilling is going to have to happen. They're going to have to build new infrastructure to pipe it and export it. That's all going to take a lot longer. So to get back up to the sort of three and a half million barrels is going to take, I think I've heard, between eight and ten years.

5:54But to get back up to one or two million, you could do that relatively quickly. As the FT's energy editor, Malcolm Moore, thanks so much, Malcolm. Thanks.

6:09Blackstone saw its share price tumble as much as 7 % after President Trump announced he wanted to ban institutional investors from buying single-family homes. Trump posted on social media yesterday that he would be calling on Congress to codify the ban. This could have major implications for private equity firms like Blackstone and Cerberus that have large residential portfolios. Trump is trying to tackle America's cost of living crisis. Home affordability is a big part of that. The ban on institutional investors is meant to make home ownership more attainable for average Americans. This statistic is a bit shocking.

6:44The median age for first-time homebuyers is at an all-time high of 40 years old.

6:57There's been significant progress on security guarantees for a potential peace deal in Ukraine. The U.K. and France have pledged to deploy troops and weaponry to the country. And the U.S. military would lead high-tech monitoring of any ceasefire line in Ukraine. That's according to two people briefed on the initiative. The FT's Henry Foy in Brussels is here to tell us more. Hey, Henry. Hi. Thanks so much for having me. So tell me exactly what France, the UK, and the US have agreed on. So there's two big outcomes, really. The first is that Britain and France said that they had committed to legal promises to deploy troops and equipment to post-war Ukraine.

7:36So after any ceasefire, the French and the Brits will put troops on the ground, not on the front lines, but in the country, which is quite a significant step and a big promise from those two states. They also say that other countries are likely to join them. The second tangible outcome is that the US has essentially agreed to lead the monitoring of any ceasefire line. At the moment, the front line between Russia and Ukraine is 1 ,400 kilometers long. And you essentially cannot put human beings on that. It's too long. So the Americans are pitching this very high-tech solution, sensors, unmanned drones, satellite technology.

8:13And the reason why that's so crucial is that the ceasefire drafts that we're seeing at the moment contain lots and lots of caveats in terms of what would happen if Russia or Ukraine broke a ceasefire in the future. So having a neutral arbiter, a technologically led arbiter of any potential violations is really, really key. And so from what we're hearing, officials are very buoyed by the sense that the Americans are saying, we'll take care of that and we have the technology to do it. Now, Henry, how big of a change is this in stance for the U.S.? Well, one of the big questions over the last year has been just how much will the U.S.

8:49under Donald Trump contribute to post-war Ukraine? And so what is quite significant about this meeting is that the Americans are saying, no, look, this is a very tangible thing we can do. And the European officials that we've spoken to since have said, look, this is a great sign that Donald Trump and his administration are bought into the future of Ukraine. And that's a message to Putin, too. It's saying the Americans are going to be around in Ukraine, yes, in a technological role, yes, in a non-combatant role, but we are involved and we will be standing with Ukraine into the future. And that's a really key thing for Ukraine to hear.

9:21How significant are these developments in terms of progress towards peace, though? This is the really big question. And essentially, there are two major caveats on everything I've just said. The first is Donald Trump. The second is Vladimir Putin. We are yet to hear exactly from Donald Trump's mouth how much America is willing to stand by Ukraine post-war. These talks and these negotiations have been led from Steve Wyckoff, who is Donald Trump's lead kind of Ukraine-Russia negotiator, by Jared Kushner, his son-in-law, and by Marco Rubio, the Secretary of State and National Security Advisor. At the end of the day, the buck will stop with the president in terms of what the U.S.

9:58is willing to contribute and how much the U.S. military will be involved. So that's the first caveat. The second is Putin. Of course, Ukraine is at war with Russia. The negotiations ultimately will have to be with Russia. The stage we're at now is the Europeans, the US and Ukraine working out exactly what their negotiation starting point will be in support of Ukraine. Ukraine is yet to sit down with Russia. Russia is yet to say any of these things that the Europeans and Americans are discussing would be acceptable. So yes, it's significant, but there's a huge question mark, which is when will the real negotiations start with Russia?

10:32Will they ever start? And what is Putin willing to accept? I guess my question is then, how much does this actually move the needle? I think we're closer to a peace deal than we have been for a number of years. Ukraine needs to know it has American and European support and tangible support before it starts proper peace negotiations. That's the first thing. And we're quite close to that point where Ukraine would feel comfortable sitting down with the Russians, knowing that the Europeans and the US have their back in certain areas. The second is that there is a definite understanding in Ukraine that negotiations are a way to end this war with good outcomes for Ukraine.

11:10I think if these talks in Paris continue into a fully fledged legal agreed document in terms of support for Ukraine, it will then be very clear to the American side that it's Russia that has to move next. Henry Foy is the FT's Brussels bureau chief. Thanks, Henry. Thank you so much. You could read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.