Big Questions About Oil and the Future of Venezuela

Written by Paul Wiseman for IIR News (Sugar Land Texas)

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Summary

U.S. President Donald Trump says the capture of Venezuelan President Nicolás Maduro and his wife will benefit the nation and the world, allowing the country to reinvigorate its flagging oil industry. But since that could require 10 years and more than $100 billion, there are questions: Will anyone risk that? What would that increased production mean for oil markets? And what are other possible implications of this action?

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Maduro Captured

The U.S. capture of Venezuelan President Nicolás Maduro and his wife over the weekend roiled both energy and geopolitical waters worldwide. U.S. President Donald Trump is promising to use the capture as leverage to help U.S. oil companies recover assets lost when Venezuela expanded the nationalization of its oil industry in 2007--and to "run the county" if necessary to accomplish that.

Many questions arise from these declarations. Are any oil companies willing to risk an investment that might never pay out? How will resulting changes affect oil markets, including trading partners like China?

The Biggest of Big Oil

Venezuela's oil potential vs. performance may be described by adapting a phrase from the genie in Disney's 1992 Aladdin movie: "Phenomenal cosmic reserves--itty bitty production levels."

Its reserves top 300 billion barrels, leading the entire world and accounting for about 17% of the world's total. But 2025 average production was only about 1 million barrels per day (BBL/d), about 1% of world output, falling to half that in December due to the U.S. capture of some Venezuelan oil tankers.

That's significantly down from 1999's 3.5 million BBL/d. In 2007, then-president Hugo Chávez expanded the nationalization of the nation's oil industry and forced major players like Exxon Mobil Corporation (Spring, Texas) and ConocoPhillips (Houston, Texas) out. Only Chevron remains, now producing about 250,000 BBL/d.

So there's plenty of reason to drool at the possibilities. But 20-plus years of corruption and neglect have left the country's infrastructure and production facilities in need of a formidable amount of time and investment to return to previous production levels.

According to Franciso Monaldi, director of the Latin American energy program at Rice University, raising output to 4 million BBL/d "will take about a decade and about a hundred billion dollars of investment."

Reuters quotes J.P. Morgan analysts led by Natasha Kaneva as saying that, with a political transition, "Venezuela could raise oil production to 1.3 million-1.4 million BBL/d within two years." Much of that increase could happen simply with the removal of U.S. export restrictions--which Trump has announced will remain in effect for the immediate future.

So far, companies like Chevron Corporation and Conoco Phillips have been understandably noncommittal, with the latter saying it is monitoring the developments in Venezuela as well as the "potential implications for global energy supply and stability."

Chevron's statement was quoted in an earlier IIR News story, saying the company "remains focused on the safety and wellbeing of our employees, as well as the integrity of our assets. We continue to operate in full compliance with all relevant laws and regulations." That story also delineates how Industrial Info's Global Market Intelligence (GMI) is tracking Venezuelan oil and gas facilities, petroleum refining facilities, and other petroleum investments reaching a total of US$207.5 million.

What Would Increased Production Mean to World Markets?

Most energy stocks rose slightly in Monday's trading, with investors hoping to see more oil flowing from Venezuela. But Industrial Info's Energy Market Strategist Geoffrey Lakings raised some questions about whether world markets can absorb an extra 4 million BBL/d by 2035.

"It is important to note that this brings us to 2035, and issues regarding what global energy demand for oil and gas will look like then, especially for Venezuelan's heavy crude oil. There may not be much appetite for it," said Lakings.

He noted that on Monday, the European Union (EU) passed the Carbon Border Adjustment Mechanism (CBAM), which is the bloc's tool to put a fair price on carbon in imported goods, acting like a carbon tariff. This, along with other energy transition moves around the world, could create a situation where "there just will not be that big of a market for the Venezuelan heavy oil barrel."

He added, "Where are the retrofitted refineries outside the U.S. and a few in Asia that can even take it? And Asia is mostly China, which is going through a massive electrification effort."

What About China?

At 4%, Venezuela was the single largest source of Chinese oil imports in recent years.

But China's interest in the situation may focus more on loans than on oil. According to a story in The Guardian, Venezuela is the fourth-biggest recipient of loans from Chinese official lenders. It received "around $106 billion in commitments between 2000 and 2023, according to AidData, a research institute at William and Mary University in Virginia. In 2024, Venezuela's debts to China were thought to total about $10 billion."

Concern about repaying those notes may be higher on China's list than the oil. It follows, then, that China issued one of the stronger condemnations of the taking of Maduro.

Is It/Will It Be Safe to Redevelop the Industry?

A smooth transition is far from assured, said Cyril Widdershoven, Senior Fellow, Energy Security and Investments, at Strategy International, in an interview with Foreign Affairs Magazine. "Venezuela has a large landmass, a large population, and many active paramilitary and criminal groups. It's a place that could easily fall into anarchy."

He added, "What the United States should do is foster some type of agreement between the new leader [former vice president and now President Delcy Rodríguez] and the opposition that results in a power-sharing agreement, where they build institutions for coexistence." He added that Trump has promised military action if Venezuela fails to accede to his demands of returning oil assets to U.S. companies that were forced out in 2007.

The safety question extends to return on investment (ROI). Even in a perfectly calm political climate, would the investments pay off?

Jesus Davis, Industrial Info's vice president of Energy Services, weighed in: "U.S. oil companies have been in a period of fiscal discipline for many years, doing more with less. Low oil prices are further hindering investment. It is hard to justify spending billions of dollars when the return on investment will be low in the current pricing environment. However, the investment could pay off over the long term, if everything were to go according to plan."

By the Numbers

• 300 billion barrels: Venezuela's world-leading reserves
• 1%: Venezuela's share of world oil production, low due to decades of infrastructure neglect and export embargoes
• $100 billion: Estimated cost to restore the nation to its production potential

Key Takeaways

• Trump is promising the capture of Maduro and wife will allow Venezuela to regain its world oil leadership, but obstacles remain.
• Questions regarding long-term political stability are likely to delay investment decisions by companies like Chevron, ConocoPhillips and others, and could prevent any real rebuilding of Venezuela's infrastructure.

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About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 trillion (USD).