Jan 5, 2026
Venezuelan Oil: Immense Geology, Heavy Reality
Executive summary
Events over the past few days have materially altered how Venezuela’s oil endowment is being discussed in the context of future global supply. From a pariah state long constrained by sanctions and naval pressure, the apparent US control of key security and energy decisions has brought Venezuela’s reserves back into medium-term supply projections for the coming decade. Yet scale should not be confused with immediacy. Venezuela may hold the world’s largest stated oil reserve base, but it remains a marginal and fragile producer. The gap between potential and reality reflects not geological scarcity, but the heavy nature of the barrels, prolonged operational decay, and binding above-ground constraints. Recent US intervention rhetoric has revived claims that Venezuelan oil could be “brought home” rapidly by US firms, largely free of geopolitics. That assumption misunderstands both the nature of Venezuela’s oil and the time constants involved in rebuilding a functioning oil system. Venezuela is not short of oil; it is short of industrial plumbing.
1. Current position: production, exports, customers
Venezuelan production had stabilised around 1.0–1.1 million mbbd, well below historic norms and a fraction of its latent capacity. Exports have been volatile but functional, with volumes fluctuating month-to-month depending on diluent availability, power reliability, shipping risk and available payment routes.
Until very recently the customer base was narrow and pragmatic:
• China remains the dominant outlet, absorbing the majority of exports, often via intermediaries and debt-linked arrangements.
• The United States had re-emerged at the margin through licensed flows, largely associated with Chevron, which retains operational presence and institutional memory.
• Cuba continues to receive small but politically significant volumes.
• Russia was not a significant end-customer of Venezuelan oil; rather, Russian entities—most notably Rosneft—acted as marketers and intermediaries, helping lift and reroute Venezuelan crude (mainly to Asia) while holding upstream stakes, with little Venezuelan oil destined for Russian refineries.
2. Reserves: what Venezuela has — and what it doesn’t
Venezuela’s proved reserves (~300bn barrels) are the largest globally on paper. The critical qualifier is composition. The centre of gravity lies in the Orinoco Heavy Oil Belt, an enormous accumulation of extra-heavy crude.
Key characteristics of Venezuelan oil:
• API gravity typically in the single digits to low teens (very heavy).
• Very high viscosity; meaning oil does not flow naturally at ambient conditions.
• Low gas content and limited natural drive.
Technically recoverable resources are vastly larger than proven reserves, but technical recoverability is not the same as commercial deliverability. The barrels exist. Making them move, blend, upgrade and sell at scale at the right price is the challenge.
3. Geology versus reality: “simple rock, hard oil”
A frequent misconception is that Orinoco oil is geologically complex. In a narrow subsurface sense, it is not. The formations are laterally extensive and well understood. The difficulty lies in production and refining.
Extra-heavy oil imposes heavy structural demands:
• Continuous energy input (steam, heating, artificial lift).
• Access to diluents to allow crude to flow and meet export specifications.
• Upgrading or access to complex refining capacity.
This is not (US) shale. It cannot be switched on with capital and confidence alone.
4. Cost structure: cheap in the ground, expensive to deliver
Venezuelan heavy oil is often described as “cheap”. That is only true before it leaves the underground reservoir.
True costs include:
• High operating expenditure per flowing barrel.
• Imported or externally sourced diluent.
• Maintenance-intensive surface facilities.
• Chronic power and water reliability issues.
• Heavy crude price discounts versus light sweet benchmarks.
• Financing, insurance and compliance frictions.
Netbacks depend less on geology and more on refining demand for heavy feedstock. When complex refineries are short heavy barrels, Venezuela matters. When they are not, price discounts widen quickly. We concur with estimates that put the full-cycle delivered cost of Venezuelan oil at between $55-$75bbl.
5. Global relevance of heavy crude
Heavy oil is not obsolete, but it is a specialist feedstock.
The US Gulf Coast, parts of China and India, and select European refiners can process it efficiently. For those systems, Venezuelan crude can be economically valuable. For the rest of the world, it is irrelevant.
This makes demand for Venezuelan oil cyclical and conditional, structurally relevant to a narrow set of complex refiners.
6. The new US narrative: “running the country” versus running an oil system
President Trump’s assertion that US energy firms can rapidly “bring home” Venezuelan oil flows because Washington will be “running” the country conflates political control with industrial functionality.
Oil does not respond to sovereignty claims. It responds to:
• Security on the ground.
• Skilled labour returning.
• Reliable power and water.
• Diluent supply chains.
• Shipping, insurance and payment systems.
• Contract sanctity and fiscal clarity.
In the near term, geopolitics is more likely to impede flows than liberate them. Shipping hesitancy, insurance withdrawal, legal uncertainty and operational disruption all matter more to markets than statements of intent.
7. If capital were unleashed: realistic timelines
A sober way to think about Venezuelan upside is through three horizons.
0–6 months: stabilisation
Workovers, repairs, better field discipline and restored blending can lift output modestly. This is about stopping decline, not transformation.
6–24 months: recovery
Under a benign political and contractual framework, Venezuela could plausibly return toward ~2 million bpd, largely by restoring existing capacity rather than building new.
2–10 years: growth
Material expansion beyond that requires tens of billions of dollars, sustained governance stability, rebuilt upgrading capacity and reintegration into global energy finance. This is slow, capital-intensive and politically fragile. Claims of a rapid return to 10m bpd are probably wide of the mark.
8. What markets should watch for
• Licensing and sanctions mechanics, not rhetoric.
• Diluent flows into the country.
• Upgrader uptime and blending capacity.
• Shipping insurance and tanker behaviour.
• OPEC’s tolerance for Venezuelan growth.
9. Chevron is the most likely catalyst for Venezuela’s production growth in the oil market.
Chevron is the fastest credible ramp-up channel for Venezuelan production, not because it can magically rebuild the country, but because it already sits inside the system through established joint ventures, experienced personnel on the ground, logistical capability, and a functioning compliance framework. Over the coming months, the key question will be how much Chevron can contribute to a meaningful uplift in output. It has the operational opportunity, crucial access to diluent and blending logistics that turn heavy crude into a marketable barrel, and the export permissions needed to move oil through the US Gulf Coast. The primary constraint on Chevron’s impact remains the licensing and rules-based framework governing Venezuelan oil exports—something the US government could, in principle, adjust relatively quickly if it chose to do so.
10. OPEC response
The market’s next assessment must include how OPEC+ is likely to treat Venezuela, which is both a political issue and a quota-management problem. In many respects Venezuela’s potential return has come from nowhere, and OPEC is unlikely to be in the mood to simply make room for it.
At present, Venezuela remains exempt from quotas alongside other sanctioned members. However, if output were to rise in a sustained and meaningful way, pressure would quickly build to reintegrate Venezuela into the OPEC+ framework. The group has recently moved toward a more formal maximum sustainable capacity approach in setting member baselines—precisely the mechanism designed to prevent any one producer from unilaterally capturing market share. In that scenario, Saudi Arabia and the UAE could find themselves offsetting incremental Venezuelan supply in order to preserve overall market balance and price stability.
Bottom line
Venezuela is not a shale wildcard waiting to be unleashed in a matter of months. It is a heavy-oil system that rewards patience, discipline and stability. The reserve base is immense, but the deliverable opportunity is conditional. Any narrative that treats Venezuelan oil as geopolitically frictionless misunderstands both the barrels and the business.
