According to Axios, the U.S. Is Closing in on a Massive Venezuela Oil Deal. 3 Oil Stocks That Could Win.

According to a recent report by Axios, the U.S. is in discussions with the Venezuelan government about taking an ownership stake in its vast oil resources. The reported deal would more than double the size of America's oil reserves. U.S. oil companies would develop the fields and provide oil revenue to Venezuela in return. "Calling this deal huge would be an understatement," stated one U.S. official in the Axios report, "It is massive."

Here's a look at the reported deal and what oil stocks could win.

A potentially massive deal

The proposed deal would give the U.S. a stake in at least 17 of Venezuela's most promising oil and gas fields. They hold an estimated 90 billion barrels of proven reserves. That's almost double the size of America's current reserves and less than a third of Venezuela's reserves, which, at around 300 billion barrels, are the largest in the world.

While Venezuela has massive oil resources, its oil industry has never come close to tapping its production potential. It currently produces about 1.1 million barrels per day (bpd), well below the U.S., the world leader at 13.7 million bpd. It produces extra-heavy oil that's thick like tar and full of sulfur, requiring expensive production methods. The country has also significantly underinvested in its oil infrastructure over the years, causing output to decline from its peak of over 3.5 million bpd in the 1960s. Additionally, many U.S. oil companies have left Venezuela after the country nationalized their assets or demanded control over joint ventures.

Chevron: The clear frontrunner

While most U.S. oil companies left Venezuela years ago, Chevron (NYSE:CVX) has operated in the country for over a century. It has maintained a toehold on Venezuela's vast oil resources through a series of joint ventures with affiliates of Venezuela's national oil company Petróleos de Venezuela (PDVSA). This past April, Chevron consolidated its Venezuela heavy oil position through an asset swap, giving it a larger stake in Petroindependencia while its Petropiar joint venture received the right to develop the adjacent Ayacucho 8 area in the Orinoco Oil Belt in exchange for some gas licenses and another non-operated interest.

That swap is key to Chevron's strategy to grow its production in Venezuela by 50% within the next two years. It has already increased its output by 40,000 bpd over the past few years, bringing it to over 250,000 bpd.

Chevron is reportedly close to another deal with Venezuela to boost its operations in the country. The Wall Street Journal recently reported that it's one of several U.S. oil companies nearing deals to invest billions of dollars in Venezuela's oil fields. It could add two more fields to its existing trio of joint ventures. Given its long-standing operations, Chevron will likely be a big winner if the U.S. gains control over some of Venezuela's oil resources.

Waiting for the right opportunity

Fellow U.S. oil giants ExxonMobil (NYSE:XOM) and ConocoPhillips (NYSE:COP) left Venezuela more than two decades ago after the country nationalized their assets. However, both are evaluating a return.

Reuters reported in April that ExxonMobil and ConocoPhillips sent teams to evaluate investment opportunities in Venezuela. ConocoPhillips has been trying to collect the $12 billion in arbitration awards from Venezuela's 2007 nationalization of its assets. Collecting that award would likely factor into its decision to invest in the country. Exxon is also seeking restitution for the seizure of its oil assets in 2007. The New York Times reported in May that Exxon was in talks to acquire the rights to produce oil in up to six fields in Venezuela.

According to a Wall Street Journal report, neither company is among the group of oil companies set to join Chevron in the pending deal to invest billions into Venezuela's oil fields. However, those discussions will continue and could yield a deal in the future, especially if the U.S. agrees to take direct stakes in several Venezuelan oil fields. Given the size of the prize, they'll likely want to participate if they can agree on acceptable commercial terms.

An interesting development to watch

While it's not done yet, the U.S. is close to a potentially massive deal to take a direct stake in several Venezuelan oil fields. Additionally, several U.S. energy companies, including Chevron, are nearing agreements to invest billions of dollars into Venezuela's oil fields. Chevron is the clear potential winner, given its continued operations in the country. However, Exxon and ConocoPhillips could also win if they sign deals to reenter the country's oil market. That makes Venezuela an interesting storyline for investors in these oil companies to watch, as it could be a needle-mover for them in the future.

Matt DiLallo has positions in Chevron and ConocoPhillips. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends ConocoPhillips. The Motley Fool has a disclosure policy.