A recent deal brokered by the Trump administration with Venezuela's government has given the United States an ownership stake in a large proportion of Venezuelan crude oil, which is interesting primarily because Venezuela has, by far, the largest crude oil reserves of any nation on the planet. Now, an American company, Chevron, which already has operations in Venezuela, is tooling up to expand its presence.

Oil giant Chevron confirmed that it will expand its operations in Venezuela, just days after President Donald Trump announced an ambitious deal to develop the nation’s oil reserves and give the Pentagon a stake in the profits.

Chevron, the only U.S. oil company that has a major presence in the country, said Wednesday that it has been assigned additional acreage in the Orinoco Belt, where the company has an established position. Joint venture plans include investing more than $7 billion over the next five years, more than doubling production to approximately 600,000 barrels a day compared with 2026.

Chevron's CEO issued a statement as well:

“Chevron’s history in Venezuela spans more than a century, and our expanded position reflects our confidence in the country’s deep resource potential and its ability to compete for investment within our portfolio for decades,” CEO Mike Wirth said in a prepared statement. “With improved terms and additional acreage, we are strengthening a portfolio that we believe can deliver attractive low-cost oil growth, support energy supply and create differentiated long-term value.”

This increase in supply should have an effect on oil prices, but it won't be an immediate effect. As of this writing, U.S. crude (USOIL) is down slightly at 89.60, while UK (Brent) crude is likewise down at 94.23.

While Venezuelan oil reserves are considerable, there's a catch. Unlike the light, sweet crude produced by Saudi Arabia and the other Middle Eastern suppliers, Venezuelan oil is heavy, sour crude, more difficult to process and more corrosive on piping and equipment than the light, sweet crude from the Middle East. Fortunately, American Gulf Coast refineries are already set up to process Venezuelan crude. 

Chevron has a history in Venezuela going back over a hundred years. They are the second-largest American oil company, with global operations, and they have been operating already in Venezuela's Orinoco Basin, where the new expansion will be taking place. This development won't happen overnight, and it sure won't happen fast enough to bring energy prices down before the midterm elections. But every journey has to start somewhere, and increasing available oil reserves in an area where the industry was badly damaged after having been nationalized under the dictatorship of Hugo Chavez, well, that can only help - in the long run.

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Energy Secretary Chris Wright, speaking to CNBC’s Brian Sullivan on Squawk Box, predicted a speedy development.

That conversation:

Secretary Wright: I said early on, when President Trump took this action, that within 12-18 months Venezuelan production would increase by 50 percent. I stand by that prediction. 

Brian Sullivan: From current levels. 

Secretary Wright: Well, from... we started at a little bit less than one million barrels per day. Today, it's over 1.2 million barrels today. I think we'll be well over a million and a half barrels a day by the first half of next year. And Venezuelan production will be over two million barrels a day by the end of this decade. So, a lot of growth in Venezuelan oil production. This is downward pressure on oil prices, globally. United States refineries, when they were built in the 60s and 70s, Venezuela was the largest exporter of oil in the world. Our refineries were built based on this Venezuelan crude. President Trump's broader agenda in the Americas, in the Western hemisphere, is to restore peaceful, prosperous relations across the countries of North and South America. That's had a rough few decades. But he's iconoclastic. And I think we are seeing an absolutely historic transformation of both Venezuela and the relations between Venezuela and the United States.

Possible complication: Venezuela has not yet had free and open elections since the ouster of Maduro. That's one thing that should be resolved before we get too happy about any deals with that country.

You can view Chevron's official press release on the deal here.