Venezuela suddenly appears more investment-worthy, with prolonged US attacks on Iran roiling crude markets.
Some US oil firms held off endorsing President Donald Trump's idea of pouring money into Venezuela in the wake of the US' capture of President Nicolas Maduro on 3 January. ExxonMobil called Venezuela "uninvestable" then. Now that the same US aircraft carrier that supported the Maduro operation is embroiled offshore Iran, crude prices are soaring and supply is pinched, ExxonMobil is suddenly starting to look at getting "boots on the ground" in Venezuela, with its massive reserves of mostly heavy crude.
While the extent of the war and its effects on oil markets is uncertain, the outlook has prompted a fresh look at reserves and the scope to ramp up production in Venezuela. Chevron — for years the last US company standing there — had already said it wants to increase its Venezuelan output of 250,000 b/d by about 50pc within two years, with a particular focus on the Ayacucho 8 oil block.
And less than a week after the attacks in Iran began, Shell signed deals with Venezuela to reactivate oil fields and explore for gas deposits. Few details were disclosed, but Shell has long been working to develop Venezuela's offshore Dragon gas field, adjacent to the border with Trinidad and Tobago.
French firm Maurel & Prom in late February brought its first drilling rig in eight years to Venezuela's conventional crude-producing region of Lake Maracaibo, the company said on 11 March in Caracas. The US in mid-February lifted restrictions on Maurel & Prom's oil and gas operations in Venezuela, where it had been working before stricter US sanctions were imposed last year. Italy's Eni and Spain's Repsol also plan to boost output in the country.
The state-controlled oil company of neighbouring Colombia, Ecopetrol, is also seeking multiple waivers to do more business with Venezuela, and already has one for its Houston office to trade Venezuelan crude. Sustained higher prices would also prompt Ecopetrol to increase its oil production and capital investment targets for 2026 overall, chief executive Ricardo Roa told investors.
Power struggle
Oil services giants Schlumberger and Halliburton have said they are eager to return to Venezuela. Baker Hughes has taken a more cautious stance, wary of electricity shortages and other challenges. Industry participants inside the country note the same bottlenecks. Venezuela could reasonably reach output of 1.4mn b/d in 2026, up by roughly 300,000 b/d from now, based on announced investment plans and US sanctions waivers, Venezuelan oil business association president Reinaldo Quintero estimates. But pushing beyond 2mn b/d would require at least 2,000MW of additional power capacity, he says. "And one new MW of installed generation capacity costs about $1mn." Venezuela has 30,000MW of nameplate power capacity, but only about half is usable, the government says.
Another hurdle is oil storage. Quintero estimates that of state-owned PdV's 40mn bl of storage capacity, about 40pc is not fully usable because it requires maintenance or faces other problems. Having ready storage is "very important for Venezuela right now", Quintero says.
Still — both for Venezuela and booming nearby rival producers Brazil, Guyana and Argentina — plugging the gap in supply from the Middle East brings more immediate challenges. Soaring freight rates triggered by the virtual closure of the strait of Hormuz have made shipments from Latin America less competitive, and cargoes harder to fix. But South America was already growing in importance as a global crude supplier before the war and latest events only reinforce this.
