Venezuela's Oil Industry: Background on Recent Developments

Key Chapter Title List

1. Crude Oil Reserves and Production
2. Petroleum Refining
3. Considerations for Expanding the Petroleum Industry

Document Introduction

This report aims to provide the United States Congress with a professional background analysis of Venezuela's petroleum industry, in response to the major geopolitical and military event that occurred in early January 2026. The core of the event was the U.S. military's mission to arrest President Nicolas Maduro (in office 2013-2026), after which the United States announced it would sell the seized Venezuelan crude oil and cooperate with Venezuela's interim authorities to modernize its energy sector. In this context, understanding the current state, historical trajectory, and future challenges of Venezuela's petroleum industry is crucial for assessing potential U.S. policy options and their impacts.

The report first reviews the decades-long decline of Venezuela's petroleum industry. From Hugo Chavez's inauguration in 1999 until his death in 2013, the country's daily crude oil production fell from approximately 3 million barrels to 2.7 million barrels. During Maduro's tenure, production further declined, hitting a low of less than 500,000 barrels per day in September 2020. Although it recovered somewhat afterwards, by August 2025 it was only slightly above 1 million barrels per day. This decline is the result of multiple factors including corruption, mismanagement, and U.S. sanctions.

Despite low production, Venezuela possesses one of the world's largest proven crude oil reserves, estimated at 300 billion barrels. A 2009 assessment by the U.S. Geological Survey further indicated that the technically recoverable resources (without considering economic conditions) in the Orinoco Belt alone ranged between 380 billion and 652 billion barrels. However, translating this immense resource potential into actual production faces severe challenges. The report notes that it is unclear whether the current upward trend in production can be sustained. Although the U.S. Trump administration expressed interest in having U.S. companies participate in revitalizing Venezuela's oil production, analysts widely question the pace of any production expansion, given the uncertainty of the country's political and economic environment and the state of its damaged infrastructure. In the short term, industry focus may be limited to selling already produced and stored crude oil.

In addition to upstream production, the report also analyzes Venezuela's downstream refining industry. Similar to crude oil production, the country's refining capacity significantly declined in the late 2010s. Although it saw a slight rebound after 2020, long-term operational failures and maintenance deficiencies have severely limited the state oil company PDVSA's ability to meet domestic fuel demand and have previously caused gasoline shortages. The report points out that refineries on the U.S. Gulf Coast have extensive experience and technology in processing the heavy crude oil produced by Venezuela, which could aid in rebuilding Venezuela's refining capacity.

The report concludes by systematically outlining the multiple complex factors that need to be considered for expanding Venezuela's petroleum industry. These include commercial challenges such as the current low international crude oil market prices, the macro context of global crude oil oversupply, and the handling of future project contract terms and existing asset claims. From a U.S. policy perspective, key issues involve whether to relax or lift current sanctions, whether to incentivize U.S. investment through tax benefits or loans, and whether and how to support demand for Venezuelan crude oil or refined products. Furthermore, the potential role of the U.S. Congress is mentioned, including oversight of executive branch actions, authorization of new projects or expansion of existing programs, and the use of appropriations to support or restrict U.S. actions in Venezuela. Together, these considerations paint a complex picture of the intricate challenges involved in attempting to restart a key strategic resource sector within a highly uncertain political environment.