Despite the instability in the Middle East, the biggest risk for the oil industry is Venezuela, the CEO of BP told CNBC Monday.
"I think most people would say the Gulf region, I actually say Venezuela," Bob Dudley, CEO of BP told CNBC at the Abu Dhabi Petroleum Exhibition & Conference, when asked about geopolitics and the oil sector.
"I think Venezuela is just defying economic gravity and I think that's a real wild card," he added.
Venezuela, an OPEC nation and one of the biggest oil producers in the world, is starting a debt renegotiation with foreign investors on Monday. However, it is not clear that President Nicolas Maduro will succeed in these talks, increasing the risk of debt default.
According to Reuters, Maduro said Sunday that "default will never reach Venezuela" and the country has "a clear strategy" — to renegotiate and refinance the foreign debt.
Venezuela aims to restructure about $60 billion in bonds. Caracas has struggled to refinance its debt because U.S. banks cannot buy new Venezuelan bonds due to sanctions imposed by U.S.
The Venezuelan economy has been in recession for four years, where food shortages, the lack of U.S. dollars and the depreciation of its own currency, has sent inflation soaring. According to Reuters, using data from the opposition-led congress, prices quickened to 248.6 percent in the first seven months of 2017. There is no published official data.
Dudley from BP believes that this situation deserves more of a spotlight than the instability in the Middle East, where the Saudi Arabia-Iran relationship has become more fragile. The former has in fact urged the international community to slap fresh sanctions on Iran, accusing it of supporting terrorism.
Also on Monday, the European Union imposed new sanctions on Venezuela, prohibiting arms sales, setting up a system for freezing assets and announcing new travel restrictions on some government officials. The EU said that the sanctions could be reversed if Venezuela returns to greater democracy.
Speaking earlier to CNBC on the sidelines of the Abu Dhabi Petroleum Exhibition & Conference, the CEO of the Mexican oil firm PEMEX told CNBC that he hopes the relationship with the United States will grow in the energy sector.
"Energy was not part of NAFTA (The North American Free Trade Agreement), because it was a closed sector," Jose Antonio Gonzalez Anaya, CEO of PEMEX told CNBC. "Now that's open, I hope the relationship can only grow," he added.
Mexico and the U.S. have been embroiled in a tense political fight since President Donald Trump took office. Trump said last month that the 23-year-old trade deal between the U.S., Canada and Mexico will come to an end, if they cannot agree on how to reform it.
"We have to protect our workers. So we'll see what happens with NAFTA, but I've been opposed to NAFTA for a long time, in terms of the fairness of NAFTA," Trump said during a visit to Canada.
Anaya told CNBC that Mexico exports about a million barrels of oil to the U.S. a day and imports about 700,000 barrels of diesel and gasoline. Anaya said he hopes that the political rhetoric will not overcome the economic logic when both countries talk trade.