After the capture of Nicolás Maduro by the US – and President Trump’s own statements – there has been speculation that the true motivation for the US intervention is Venezuelan oil, which supposedly has the largest reserves in the world. Behind that statement there are myths, but also realities that are worth analyzing.
To begin with, it is not clear that Venezuela has the largest reserves. The 3P reserves – commercially recoverable estimated as proven, probable and possible – are published by OPEC based on what each country self-reports, it does not audit them. In 2005, Venezuela declared 80,000 million; In 2010, with a barrel at 100 dollars, Chávez decided to triple that figure “by decree”, reclassifying the ultra-heavy crude oil from the Orinoco Belt. There were no new findings, just creative accounting assuming unrealistic recovery rates. Independent consultants like Rystad estimate the economically viable figure at just 80,000 million; the rest is more politics than geology. Venezuela has a lot of oil, yes, but the 300 billion barrel figure should be taken with a pinch of salt.
Added to this is the quality of the oil. Much of Venezuela’s historical reserves and production is ultra-heavy crude oil: rich in metals, acidic and expensive to extract, process and refine. It requires specialized infrastructure and custom-made refineries, which practically only exist in the US.
Venezuela produced nearly 3.5 million barrels per day in the late 1990s. Today it barely reaches 900 thousand. PDVSA – which became a world-class company – was purged by Chávez and Maduro and lost its human capital: engineers were replaced by soldiers and militants, and the results are evident. At the same time, investment in maintenance and new projects was stopped, leaving an infrastructure in ruins. And as I mentioned, infrastructure is key: it is not just about extracting the oil, which is already complex in itself, it has to be cleaned of water and salts, transported and taken to the market.
The numbers to rebuild this disaster are overwhelming. Analysts estimate that returning to production levels in the nineties would require investments of up to $180 billion in the next decade; Just maintaining the current situation requires 53,000 million. But not only invest money: we must repair 50-year-old pipelines, revive refineries that operate at 10% and replace equipment looted or sold for scrap. Furthermore, Venezuelan crude oil being ultra-heavy, its equilibrium point is around $80 per barrel.
With current prices hovering around 60, and without political stability or legal guarantees, expecting oil companies to invest massively seems difficult. Nobody invests millions of dollars if the numbers don’t add up.
And here comes the most complex part: even if they add up, investments of this size take decades, if not decades, to recover and become profitable. For that, certainty and certainty are needed. Today, companies may assume that Trump will look out for their interests, but tomorrow who knows.
It is possible that Venezuelan production will increase marginally in the short term and will be destined, as historically, to US refineries on the Gulf coast. But to think that this changes the energy matrix of the United States, which produces 13 million barrels a day, or that it will be a good business in the short term, is illusory. In my opinion, that was the argument used to convince America First of the Trump coalition.
