Last week, U.S. President Donald Trump urged oil executives to invest heavily to revive Venezuela's struggling oil sector. The pitch largely failed to gain traction.
Exxon Mobil CEO Darren Woods delivered a blunt assessment, labeling the South American nation "uninvestable" under its current commercial and legal frameworks. ConocoPhillips CEO Ryan Lance reminded Trump that his company lost billions of dollars when it left Venezuela during the Chavez government.
The steep decline of Venezuela's energy industry started in 2007. That year, Hugo Chávez's government nationalized the oil assets of ExxonMobil and ConocoPhillips. This followed the companies' refusal to accept new terms granting state-owned PDVSA majority control of their projects. A presidential decree and a new Hydrocarbons Law initiated the process.
Trump did secure some support. Hilcorp's Jeff Hildebrand stated his company is prepared to help rebuild Venezuela's energy infrastructure. Chevron announced it could essentially immediately increase its Venezuela production by 100%, from a current level of 240,000 barrels per day.
Venezuela currently produces about 1 million barrels of oil per day. Chevron accounts for roughly a quarter of that output. Returning production to its 1970s peak of 3.5 million barrels daily would require billions in infrastructure spending.
U.S. refiners value Venezuelan crude for its specific qualities. Merey crude from the Orinoco belt has very low API gravity and high sulfur content. This heavy oil requires specialized refinery units, like cokers, to process it into high-value products.
However, less than half of U.S. refineries have coking capacity. Those on the Gulf and East Coasts are best positioned to use more Venezuelan crude. Refiners with significant coking capability include Valero, Exxon, Chevron, Marathon Petroleum, Phillips 66, and PBF Energy.
Greater availability of Venezuelan crude could reduce demand for other heavy oils like Canadian crude, Mexican Maya, and some Middle Eastern grades. The U.S. still purchases 80% of Canada's crude exports. More Venezuelan oil could benefit Mid-continent and West Coast refiners, including British Petroleum and HF Sinclair, if it displaces demand on the Gulf Coast.
The potential for a quick production increase in Venezuela is limited. Analysis from Rystad Energy suggests only 300,000 to 350,000 barrels per day could be restored rapidly with minimal spending from the current output. Boosting production beyond 1.4 million barrels daily would need heavy, sustained investment.
Rystad estimates Venezuela requires $53 billion over 15 years just to maintain production at 1.1 million barrels per day. Raising output to over 3 million barrels daily could cost up to $183 billion in the same period.
Satellite intelligence from Kayrros describes Venezuela's energy infrastructure as being in a "catastrophic state" after decades of neglect, under-investment, and equipment cannibalization.
Kayrros reports many oil storage tanks at the Bajo Grande and Puerto Miranda terminals are non-operational due to corrosion and poor maintenance. The firm estimates about one-third of Venezuela's total storage capacity is currently inactive. This reflects broken tanks, low refinery runs, and falling production.
Operations at the large Amuay and Cardón refineries are running below 20% of their capacity. Experts say they have effectively become "de facto storage centres."
Venezuela's pipeline network is also in disrepair. A leaked 2021 PDVSA document revealed the country's oil pipelines had not been updated in 50 years. PDVSA once estimated needing $58 billion to restore them to peak condition. More recent estimates exceed $100 billion. Venezuela's operational oil pipeline network spans 2,139 miles. For comparison, the UAE, which produces about 3.2 million barrels per day, has roughly 9,000 kilometers of pipeline.