Venezuela, home to significant oil reserves, occupies a pivotal position in the global energy landscape. Its immense hydrocarbon base holds the potential to reshape energy flows.
Against this backdrop, America’s ongoing pursuit of energy dominance has brought renewed attention to Venezuela’s oil sector.
The US “energy empire” ranges from the Arctic oilfields of Alaska to the southern tip of Patagonia, creating a vast petroleum empire under the stewardship of an unpredictable leader.
Since the shale revolution, US energy policy has shifted toward achieving self-sufficiency and global market influence. This ambition is not only about securing a domestic supply, but also about leveraging energy as a tool of geopolitical power, forging alliances, deterring rivals and pursuing favourable prices.
International oil companies have a long history with Venezuela. The legacy of nationalisations, abrupt policy changes and expropriations under previous regimes has left deep scars. Many firms have not forgotten the billions lost in sunk investments, stranded assets and legal disputes. This history of volatility has bred a culture of caution, if not outright scepticism, among the industry’s major players.
The company’s assessment reflects a broader industry consensus: until Venezuela can credibly guarantee the sanctity of contracts and the rule of law, capital will stay on the sidelines.
It was therefore no surprise that a recent high-profile meeting between US policymakers and oil industry executives underscored the complex calculus behind energy investment. Executives reiterated decisions to allocate capital in the oil sector are fundamentally driven by long-term certainty. The underlying message was clear: while government overtures may open doors, sustainable investment requires predictability and security over decades, not only election cycles.
Robust guarantees
For oil majors to consider re-engagement with Venezuela certain non-negotiable conditions must be met. Among these are robust guarantees that protect investments from arbitrary seizure, and comprehensive contract reforms that ensure long-term stability. Without binding frameworks, regardless of who is in power, companies will remain wary, unwilling to expose themselves to the risks that have defined Venezuela’s oil sector for decades.
ExxonMobil has been notably candid about its position. The company describes itself as being in the “depletion business”, its core mission being to manage the decline of mature assets while seeking out new, viable sources of production. From this vantage point Exxon regards Venezuela as “currently uninvestable”, citing the absence of legal certainty and the high risk of future expropriation.
The company’s assessment reflects a broader industry consensus: until Venezuela can credibly guarantee the sanctity of contracts and the rule of law, capital will stay on the sidelines. Even if the political and legal environment were to improve overnight, the timeline for restoring Venezuela’s oil production would stretch over years, not months.
Significant capital investment is needed to rehabilitate ageing infrastructure, drill new wells and upgrade refineries. Industry analysts estimate it could take a decade and tens of billions of dollars for Venezuela to approach its pre-crisis output levels.
A further complication is the challenge of finding reliable buyers for Venezuelan crude, particularly if US sanctions are tightened against major importers such as China and Russia. With traditional markets potentially out of reach, Venezuela faces the prospect of stranded production, even if output increases.
Lastly, the economics of Venezuelan oil are fraught with contradictions. Producing a barrel of oil in the country can cost as much as $80 (R1,308), but the price sits at $60 (R981.25) or less. Meanwhile, producers and policymakers strive for higher output and lower prices to secure market share and political support.
The US colonial conquest in Venezuela may continue to cast a long shadow. Energy dominance isn’t drilled out of the ground; it’s built on trust, transparency, stability, sovereignty and genuine reform, and until that foundation is laid the world’s petroleum giants will keep Venezuela’s riches at arm’s length.
• Mashele, an energy economist, is a member of the board of the National Transmission Company of South Africa.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.