Trump threatens to keep ‘too cute’ Exxon out of Venezuela after CEO provides reality check on ‘univestable’ industry

As other oil executives lavished President Trump with praise at the White House, Exxon Mobil CEO Darren Woods bluntly said the Venezuelan oil industry is currently “univestable,” and that major reforms are required before even considering committing the many billions of dollars required to revitalize the country’s dilapidated crude business.

Two days later, a miffed Trump told reporters Jan. 11 that he would “probably be inclined to keep Exxon out” of Venezuela. “I didn’t like their response. They’re playing too cute,” Trump said.

Woods, an Exxon lifer who succeeded Rex Tillerson as CEO in 2017 when his boss went to work for Trump, is a reserved but strong-spoken chief who has emerged as an unofficial industry spokesman as the leader of the world’s largest Big Oil giant.

But he’s inadvertently crossed swards with the president who wants U.S. Big Oil players to invest more than $100 billion in the Venezuelan oil sector—and to do it quickly.

“There was nobody to say anything, except Darren, and he’s eloquent as heck,” said Jim Wicklund, veteran oil analyst and managing director for PPHB energy investment firm, noting that Exxon stock most likely would have fallen if Woods had overcommitted to Venezuela.

“This is Trump’s problem. There’s no urgency by the industry at all to go back into Venezuela. And there’s almost no inducement other than guaranteeing profitability, which they can’t do,” Wicklund said. “You can sweeten the terms, but the political risk outweighs that variable by a factor of 10.

“We don’t need Venezuelan oil. It’s going to hurt everybody else (including U.S. producers) if we boost Venezuelan production because, right now, we’re awash in oil.”

But Trump also wants more oil to keep lowering prices because it means cheaper prices at the pump to help win the midterm elections.

Exxon and ConocoPhillips, specifically, had their Venezuelan oil assets expropriated by the government in 2007, costing them billions of dollars. Although Venezuela has the world’s largest proven oil reserves, its oil output has plunged to one-third of its volumes from the turn of the century because of mismanagement, labor strikes, and U.S. sanctions.

Trump has used the 2007 expropriations as a pretense for the shocking Jan. 3 military attack and arrest of leader Nicolás Maduro. Trump has repeatedly called the expropriations the largest theft in American history.

He called an impressive group of global oil executives to the White House on Jan. 9 to discuss how they will go into Venezuela, invest, and turn the industry around.

But Woods more than anyone put a damper on Trump’s enthusiasm to move fast and spend big. Woods promised to set a technical team to Venezuela within two weeks to assess the situation. But any major financial commitments would take much longer.

“The questions will ultimately be: How durable are the protections from a financial standpoint? What do the terms look like? What are the commercial frameworks, the legal frameworks?” Woods said. “All those things have to be put in place in order to make a decision to understand what your return will be over the next several decades for these billions of dollars of investment.”

Exxon did not respond to requests for comment Jan. 12, and the White House declined further comment.

Oil desires meet reality

Dan Pickering, founder of the Pickering Energy Partners consulting and research firm, said he expected “cheerleading” from the oil executives, and they “delivered in spades” except for Woods.

“If you only had to have one snippet about what’s actually going to happen, Exxon gave it to you,” Pickering said. “We could have hung up after that.”

The reality: More than doubling Venezuela’s current oil production likely would take until 2030 and cost about $110 billion, according to research firm Rystad Energy, while tripling back to levels from 2000 would take well over a decade and cost closer to $185 billion.

Exxon Mobil recently pioneered the oil industry offshore of Guyana, Venezuela’s southern neighbor, and it makes more sense to keep investing there than to move back into Venezuela, Wicklund said.

“If you have the choice of committing capital to another well in Guyana, an offshore well in Brazil, making an acquisition in the Permian basin, or spending $20 billion and waiting a couple of years to get an incremental drop of oil out of Venezuela, then it comes in last,” Wicklund said.

You must spend to rebuild the infrastructure in Venezuela long before it can return to profitability and, even though the oil is already discovered, it isn’t cheap to produce because the extra heavy grade of Venezuelan crude requires extra effort to get out of the ground. Diluent—essentially a very light oil—is needed to thin out and get the heavy crude to flow out of wells.

“You’re talking about having to bring in oil to get the oil out. It’s basically sludge,” Wicklund said.

Maybe Woods could have “sugarcoated” his message a bit more, but he did still promise boots on the ground quickly—just not money, Wicklund said.

“He may regret saying that today, but none of it would have changed reality.”

That said, Trump remains in a position of strength in Venezuela because controlling the oil can force the acting Venezuelan government to cooperate.

“The U.S. doesn’t need the oil, but it’s a perfect way to control Venezuela,” Wicklund said. “Why did you leave everybody in place? Stability. They all hate you, yes, but now Trump owns on the purse strings. It is kind of brilliant, and nature will take its course in the economics of the oil and gas industry.”

This story was originally featured on Fortune.com