(Bloomberg) — North American Blue Energy Partners (NABEP), the U.S. government-backed producer of Venezuelan oil, plans to more than double crude production in just over two years as it expands operations in the South American country.
NABEP aims to increase production to 500,000 bpd by the end of 2028 from about 200,000 bpd currently, the company said in a statement to Bloomberg News. The expansion is expected to be funded primarily through internal cash flow, although NABEP said its agreement with the U.S. government will accelerate its growth plans and could bring additional outside investment.
It is the first time NABEP has detailed its near-term production targets since reaching the agreement last month. At the time, the company said it ultimately aims to reach 1 MMbpd but did not provide a timeline.
Some analysts question whether the rapid expansion is achievable, particularly given constraints in Venezuela’s oilfield services sector.
“An important constraint is the services side of the business,” said Schreiner Parker, head of emerging markets for Rystad Energy. “I don’t think it’s guaranteed that people will import rigs. And if they do, they’ll be asking, ‘Can I get them out?’”
NABEP has emerged as a significant player in Venezuela after reaching an agreement with the U.S. government covering oil assets with an estimated 65 billion bbl of proved reserves. The U.S. government is taking a 35% equity stake in the project.
The company has increased production more than tenfold over the past two years and is now Venezuela’s second-largest private oil producer behind Chevron Corp., according to Bloomberg. Chevron last week also announced plans to increase production in the country.
NABEP said its recent growth has been financed by “significant free cash flow” generated from its Venezuelan wells. Parker, however, said funding the planned expansion solely through internal cash flow could prove challenging.
“It’s inevitable it will need to raise capital,” he said.
The agreement represents an unusual level of U.S. government involvement in an overseas oil development. NABEP said that involvement could help attract investment needed to accelerate drilling and production growth.
Questions remain over some elements of the arrangement, including the potential sale of a portion of production to the U.S. government at cost.
“It’s like a grocery store selling 20% of its milk at cost, without profit. An investor might say, ‘I don’t know if I want to be part of that,’” said Sarah Emerson, president of research and forecasting company ESAI Energy.
NABEP’s expansion comes as efforts accelerate to revive Venezuela’s oil sector and attract capital to increase production from the country’s large resource base.
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