In December last year, Ed Crooks, Vice-chair, Americas at Wood Mackenzie wrote in Energy Pulse about what regime change in Venezuela might mean for global oil markets.

The bottom line: there is potential for material growth in Venezuela's oil production within a couple of years. But its industry is in desperate need of investment and operational support. Predictions that 3 million barrels per day of additional production could be brought on quickly are optimistic in the extreme.

Venezuela has one of the world’s largest oil resource bases. (I say "one of", because most of that resource is heavy oil. It is not directly comparable to the reserves reported by Saudi Arabia, for example.)

But as President Trump noted on Saturday, the performance of Venezuela's oil industry has fallen far short of its potential. The combined impact of domestic mismanagement and international sanctions drove production down from over 3 million b/d in the early 2000s to about 2 million b/d in 2017, and to just 0.9 million b/d in 2025. The physical infrastructure needed to support production has been degraded, and many of the skilled workers needed to develop and operate the assets have left the country.

We estimated last year that operational improvements and some investment in the Orinoco Belt heavy oil region could raise Venezuela’s production back to the levels of the mid-2010s, at around 2 million b/d, within one to two years.

Adrian Lara, Wood Mackenzie’s principal analyst for Latin America upstream, said: “Our assumption is that there are a lot of wells that just need a workover. You can boost production through opex, without needing much new capex.”

For that to happen, key conditions would need to be in place: political stability in Venezuela, sustained support from the US, international oil companies that are prepared to invest, and global oil markets that would justify that investment. None of this is impossible, but nor is it guaranteed. 

Further increases in production are likely to take longer. Wood Mackenzie estimates that the Orinoco Belt joint ventures between PDVSA and international oil companies would need $15-$20 billion of investment to add another 500,000 b/d of production, which could take ten years.

The example of Iraq shows that regime change and ending sanctions can lead to material changes in a country's oil industry. In 2002, shortly before the US-led invasion, Iraq’s production was about 2 million b/d. By 2019, it was more than double that, at about 4.7 million b/d.

Big changes are possible, but they take time.

For more, read the full piece here

KeyFacts Energy Industry Directory: Wood Mackenzie