Venezuela’s oil sector, formerly a global top-five producer, is at an urgent crossroads. U.S. oil giants are increasing their pleas for billions in inflation-fighting investments in the U.S. oil industry. Former President Donald Trump just announced that with these companies he would invest billions to help Venezuela’s vast oil reserves go into production. These reserves are widely considered to be the largest in the world. The reality is complex and fraught with challenges. Sanctions, nationalization, and widespread corruption are simultaneously undermining the industry’s capacity to be revived.
Venezuela’s economy has been decimated by a perfect storm of U.S. sanctions, incompetence, and endemic corruption. At the same time, the nation’s oil production has plummeted. It fell from a high of 3.5 million barrels per day in the 1970s to around 1 million barrels per day last year, representing less than 1% of global production. Most of this dramatic decline has been attributed to a combination of decades of underinvestment and ineffective management of resources.
Even though Venezuela holds around 17% of the world’s proven oil reserves, the country has never paid its debts. To return oil production to 2 million barrels per day by the early 2030s, it would require an estimated $110 billion investment, as noted by energy consultancy Rystad. Significantly, the U.S. embargo on Venezuelan oil is still dangerously intact, making recovery efforts even more difficult.
A few years back former President Hugo Chávez nationalized Venezuela’s oil industry. This decision has had a chilling effect on American companies’ willingness to invest in the region. Trump envisions a robust return of U.S. firms, stating, “We’re going to have our very large United States oil companies – the biggest anywhere in the world – go in, spend billions of dollars, fix the badly broken infrastructure and start making money for the country.”
As analysts warn, the race to lure private investment will be a difficult one. Jorge León, head of geopolitical analysis at Rystad Energy, highlighted a major one. He added that it would be “extremely, extremely complicated” for Venezuela to obtain the technology required to significantly increase oil production. He emphasized that companies are going to be cautious to step back into the market. Their worries around stability and governance are precluding their progress.
Tina Fordham added that “one assumes that they have been part of the conversation,” suggesting that some level of dialogue may already exist between U.S. firms and Venezuelan officials regarding future investments. Yet, León pointed out that companies will likely wait to see if the political environment stabilizes before committing any significant resources.
Chevron, one of the major players in the oil industry, reaffirmed its commitment to compliance with existing regulations, stating that it remains focused on “the safety and wellbeing of our employees, as well as the integrity of our assets.” Likewise, ConocoPhillips said it would be too soon to predict its future business developments investments in Venezuela.
The past history of post-authoritarian transitions makes this even more complex. As Fordham explained, transitions like these are often non-linear and rarely clear-cut. “The history of post-authoritarian transitions, whether they are organic or externally brought about, is long and non-linear,” she noted.
While Trump expresses confidence in a potential turnaround, suggesting that “this is one of the most stunning, effective and powerful displays of American military might and competence,” skeptics remain cautious about his optimism. Fordham pointed out that “Trump appears to have complete faith that, under him, things will be different.”