With Hugo Chavez gone, US oil industry eyes Venezuela

Oil analysts don't expect sudden changes in Venezuela oil policies after Hugo Chavez's death. But political change in post-Chavez Venezuela could open its oil industry to much wider foreign investment.

Venezuelan President Hugo Chavez's death is not likely to result in near-term changes to the Venezuelan oil industry or global energy landscape, but it could ultimately result in political change that would reopen the country's energy industry to foreign investment.

As news of Chavez's death swept through IHS CERAWeek, the world's largest conference for energy executives, in Houston on Tuesday afternoon, participants flocked to televisions, looking for news on the political future of a country that has the second largest oil reserves in the world.

"It's too soon to say what Hugo Chavez's death means for oil prices," said IHS Vice Chair Daniel Yergin. "But it is certainly true that oil prices are what made Hugo Chavez possible," as the collapse of oil prices in the late 1990s "gave him the opening to become president" and rising oil prices since 2000 "gave him the financial resources to consolidate power."

Analysts and attendees at the Houston energy conference said it was unclear what would happen after the country holds an election for a new president. For now, Venezuela's Vice President Nicolas Maduro is in charge and the country's army chiefs are reported to be supporting him.

"Without (Chavez's) charisma and force of character, it is not all clear how his successors will maintain the system he created," Yergin said. (Read More: Traders React: What Chavez Death Means for Oil Market)

Among the major integrated oil companies, ConocoPhillips and ExxonMobil could stand to benefit greatly from regime change in Venezuela, if the new leadership allows overseas oil companies to return, analysts said.

The nationalization of Venezuela's oil industry in 2007 resulted in the exit of those two companies who were unable to reach a new agreement with the state-owned oil company PDVSA.

Too Early to Tell

"It's too early to tell how the new leader will handle it, but ConocoPhillips could benefit the most," said Fadel Gheit, senior oil analyst at Oppenheimer & Co.

ConocoPhillips was the biggest foreign stakeholder in Venezuela at the time of nationalization and could benefit greatly from regaining its former assets, Gheit said, adding: "The book value of assets that were confiscated was $4.5 billion (at the time.) The market value is now $20 to $30 billion... ConocoPhillips could eventually see a net gain of $10 billion."

But that assumes ConocoPhillips would want to return to the country. Venezuela's economic problems extend beyond the oil business. "It really much depends on what kind of government will follow Chavez," said Enrique Sira, IHS senior research director for Latin America.

"The only thing for sure is the fact that the industry is in very poor condition -- upstream, downstream, power, and distribution. Electricity has to be rationed. It has a gas deficit that's been running for years and the country doesn't produce anywhere near what it could produce," Sira said. (Read More: Venezuela Vote, Post-Chavez, Next Risk for Oil)

ConocoPhillips CEO Ryan Lance, who spoke Tuesday morning at the Houston energy conference prior to news of Chavez's death, noted how the global energy landscape has changed dramatically.

"The new landscape is like someone picked up the energy world and tilted it," he said, as countries with great demand for energy and those with ample supplies has changed. The U.S. is now exporting more of its natural resources than ever before, he said. Those exports include shipping record supplies of US gasoline to Venezuela. Meanwhile Venezuela oil exports to the U.S. are on the decline.

Sira said Venezuela could produce as much as 6 to 9 million barrels of oil a day but now it's probably less than 2.5 million barrels. He said oil production peaked in the early year at 3.3 million barrels. (Read More: Why Venezuela's World-Beating Oil Reserves Are 'Irrelevant')

Venezuela ranked fourth in oil imports to the U.S. last year at 906,000 barrels per day, according to the U.S. Energy Information Administration (EIA). But crude oil imports from Venezuela have been declining steadily since 2004, when they peaked at 1.3 million barrels per day.

Venezuela's refineries are also in such poor shape that it has to import gasoline and diesel from the U.S. In December, Venezuela imported a record 197,000 barrels per day of petroleum products from the U.S., according to EIA data.

In the short-run, oil prices may not be greatly impacted by regime change in Venezuela since for now the flow of oil from Venezuela to the U.S. and domestic fuel imports to the South American country are likely to continue current trends, said Houston-based energy analyst Andy Lipow. "We both need each other."