Chevron Corporation (CVX.US) is betting $7 billion on Venezuela! The number of oil drilling rigs will double, with a daily output aiming for 600,000 barrels.

Eimear Bonner, Chief Financial Officer of Chevron Corporation (CVX.US), stated on Tuesday at a Barclays meeting that as part of a $7 billion, five-year expansion plan, Chevron Corporation plans to more than double the number of oil drilling rigs it operates in Venezuela, aiming to increase the companys oil production in the country to approximately 600,000 barrels per day. Currently, Chevron Corporation's total production from its three joint ventures in Venezuela is about 290,000 barrels per day, all of which is exported to the United States. Eimear Bonner indicated that once Chevron's joint ventures in Venezuela reach a production level of 600,000 barrels per day, the company anticipates production will hit a plateau of 600,000 to 700,000 barrels per day. This CFO mentioned at the meeting, The vast resource base provides us with an opportunity to extend this plateau for another 5 to 10 years, and this is just the initial recovery of the reservoir. There is significant potential for further growth here. Eimear Bonner also noted that the new contract terms signed by Chevron Corporation last week grant the company the right to pursue international arbitration. The ability to resolve potential disputes through international arbitration courts has been a key demand from other oil producers, including Exxon Mobil Corporation (XOM.US) and ConocoPhillips (COP.US). These two companies exited Venezuela in 2007 after their assets were nationalized. Chevron Corporation announced earlier this month that it plans to invest $7 billion through joint ventures over the next five years to more than double its crude oil production in Venezuela. This will be one of the largest investment commitments by international oil companies in Venezuela in recent years and further solidifies Chevron Corporations dominant position in the countrys oil landscape. Venezuela has the largest oil reserves in the world, but decades of mismanagement, corruption, and associated restrictions have severely declined the countrys fossil fuel industry. Chevron Corporation expects its oil production in Venezuela to reach approximately 600,000 barrels per day by 2031. The company also stated that Venezuela's rich oil resource potential will last for decades, with total production costs expected to be less than $20 per barrel. Chevron Corporation has been involved in local energy business collaborations in Venezuela for over a century. While other foreign oil companies like Shell and Repsol still hold a foothold in the country, their U.S. competitors Exxon Mobil Corporation and ConocoPhillips were forced to exit after their assets were confiscated. Since the country was sanctioned eight years ago, Chevron Corporation has received exemptions from the U.S. Treasury Department, allowing it to continue tapping into rich oil resources in Venezuela. Chevron Corporation has four major projects in Venezuela: two in the Orinoco Oil Belt and two in the Sucre region, which is the birthplace of the Venezuelan oil industry. Together, these projects account for nearly 25% of the countrys total oil production of close to 1 million barrels per day. In April of this year, Chevron Corporation reached an asset swap agreement with the Venezuelan government. Under this agreement, Chevron Corporations stake in a giant oil field in the Venezuelan Orinoco Oil Belt will increase to 49%, granting the American company the rights to develop a second area. Middle East conflicts and risks in the Strait of Hormuz have heightened global interest in non-Middle Eastern heavy crude oil supplies, and the Orinoco Belt in Venezuela is one of the world's most important heavy oil resource areas; this transaction allows Chevron Corporation to further concentrate its resource allocation on core heavy oil projects while divesting from smaller fields in the west and offshore gas blocks, strategically focusing more. If international oil prices remain high and the U.S. continues to encourage Venezuela to boost production, Chevron Corporations assets in Latin America could not only enhance upstream growth flexibility but also strengthen the security of heavy oil supply that is more aligned with the U.S. domestic refining system.