The separation of Church and State — and why refining, not drilling, is quietly calling the shots.
In 2012, ConocoPhillips split from Phillips 66, formally separating what were deemed “high-cost” upstream operations from “efficient” downstream refining. Before that, the integrated supermajor model — Chevron, Exxon — reigned supreme.
Being fully integrated offers a natural hedge. When crude prices fall, refining margins typically improve; when prices rise, upstream profits compensate. But when oil prices are suppressed, as they are now, refining divisions increasingly get treated as cash cows — there to subsidise drilling ambition.
That context matters when you look at Exxon’s CEO, Darren Woods. Unlike his predecessor Rex Tillerson — a dealmaker and exploration man who left Exxon to become Trump’s Secretary of State in 2017 — Woods is a downstream operator by heritage.
Which helps explain why Trump was reportedly told so bluntly that Venezuela is currently “un-investable.” From a downstream perspective, dragging the crown jewel of your P&L through geopolitical mud for the sake of a vanity project makes little sense.
Take Boscan — effectively liquid asphalt. Will U.S. Gulf refiners really get away with not participating in Venezuelan upstream activity?
Chevron’s Pascagoula is the smallest U.S. coking refinery at ~355 kb/d, yet Chevron is the only major still visibly involved. Motiva (Aramco), Marathon, Exxon, and CITGO all operate significantly larger systems — 500–600 kb/d, multiple plants in Exxon and Marathon’s case — but remain conspicuously absent upstream.
Trump is mercurial, but one trait is reliable: he is transactional. That’s why Vitol and Trafigura were quick to call the DOJ with the obvious opening gambit: “Let us help you bring in diluents.”
But the DOJ today increasingly resembles somewhere you’d bring a pitch deck, not just a compliance lawyer. And there are more creative plays on the table.
Consider TIPCO Asphalt, owner of the Kemaman bitumen refinery in Malaysia. Listed in Thailand with a market cap of just USD 118 million, its shareholder structure is revealing:
An aggressive move on the remaining 45% would secure effective board control. It’s a downstream-heavy, politically quieter way of solving a Venezuelan diluent problem without touching upstream exploration.
On a larger scale sits CITGO’s mothballed San Nicolas project in Aruba. Between 2016–2019, refurbishing the refinery was estimated at USD 685–715 million, including a subsea gas pipeline from Venezuela’s Tiguadare facility — effectively guaranteeing feedstock.
San Nicolas was designed to separate Orinoco heavy crude, producing a Maya-like finished product while shipping stripped naphtha back to Venezuela as diluent for stubborn wells. Elegant, circular, and politically easier to defend than drilling.
Keep a close eye on Elliott Investment Management. The hybrid hedge fund / private equity house — now set to rebrand CITGO as Amber Energy Inc. — specialises in exactly this sort of asset-driven pressure.
Their USD 2.5 billion stake in Phillips 66 bought them 5.7% ownership and two board seats, enough to rattle cages without owning the whole house. This is their natural habitat.
Driving season now effectively starts in August, nine months out from Valero’s relentless demand for feedstocks — and by most accounts, the coming year could be a record.
Upstream ambition may grab headlines, but it’s downstream ingenuity — asphalt, separation plants, diluents, and balance-sheet engineering — that will determine who actually benefits from Venezuela’s next chapter.
