The White House of Donald Trump has made no secret of the fact that the main objective of the recent attack on Venezuela is the control of the South American country’s oil resources, which are the most abundant in the world with approx 300 billion barrels. In this regard, the US administration has stated that Venezuela will deliver 30 to 50 million barrels of oil to the American government. The issue of Venezuelan oil, however, is much more complex than it might seem at first glance, involving geological and geopolitical factors which in reality these reservations are more on paper than in practice: the raw material is there, but the exodus of foreign oil companies after the nationalization desired by the then Venezuelan president Hugo Chavez caused a sharp decrease in production. Part of the US plan would be precisely increase Venezuela’s oil production so that you can benefit economically.
Why Venezuela is so rich in oil
Venezuela is located in a tectonic context in which the Caribbean plate, colliding with the South American plate, created a mountain range that allowed the formation of a petroleum system. Between 120 and 90 million years ago, much of the north of the country was covered by warm and shallow seasrich in plankton and other organisms that have accumulated on the seabed forming layers of sediment with abundant organic matter which over millions of years has transformed into hydrocarbons and therefore oil. Tectonics did the rest: the interaction between the two plates created it anticlines (we can understand them as folds in the earth’s crust) capable of accumulating the oil formed in porous rocks and trapping it in a boundary of impermeable rocks.
Where is oil found in Venezuela and what does “heavy” mean?
In Venezuela there are mainly two large oil areas: The Maracaibo Basinto the west of the country, with deep deposits (even 5000 meters deep) of light oil. To the east, however, there is the Orinoco belta huge expanse hundreds of kilometers long that hosts colossal quantities of oil at relatively shallow depths, this time extra-heavy.
Light and heavy indicate the density and viscosity of oil. Unlike the Middle East, Venezuela is rich in heavy oil: thick, viscous, rich in sulfur and impurities. This is because the interaction with water and bacteria has reduced the lighter fractions of the crude oil, leaving a heavier mixture.
Precisely because it is dense and viscous, heavy oil is much more difficult to extracteven if it is found at shallower depths: it is necessary to resort to high-pressure steam injections or solvents that thin the crude oil so that it can be extracted more easily. It takes a lot of energy and maintenance. For this reason the Orinoco belt has a recovery factor very lowthat is, the percentage of oil that can be recovered: let’s talk about 3-5%.
History of the Venezuelan oil industry and the “breakup” of 2007
Since the first decades of the twentieth century, Venezuela has seen great extraction activity, especially in the Maracaibo Basin, where oil is light. Production grew over the decades also thanks to the intervention of various foreign oil companies operating in the country. In the 70s they produced more 3.5 million barrels per day; in 1975 the PDVSA (Petróleos de Venezuela, SA), the Venezuelan state oil company, which becomes one of the most prestigious in the world thanks to its skills and technological resources.
The breakup year is 2007in which the then president of Venezuela Hugo Chavez nationalizes oil production in the very rich Orinoco Belt, where foreign companies operated. With the operation Plena Soberania Petrolera (“full oil sovereignty”), Chávez puts Western companies faced with an ultimatum: become minority shareholders or abandon extractive activity. Without the operational skills, technologies and capital of foreign companies, PDVSA would not have been able to manage the complex and expensive extraction of extra-heavy oil in the Orinoco Belt on its own. Chávez thus decides that the operation of the joint ventures in the territory is allowed, but PDVSA would have had at least the 60% of the shares and operational control of the extraction activity.
Some companies, like ExxonMobil And ConocoPhillipsreject the agreement and sue Venezuela for illegal expropriation. Other companies (Chevron, Repsol, Eni, Total, Statoil And BP) accept, but greatly reduce activities and drastically reduce investments.
Symbolically and politically, this is a victory for Venezuela. But from a technical and industrial point of view, in hindsight, it is the beginning of a structural decline.
In fact, PDVSA lacks the expertise in extra-heavy oil extraction acquired over the decades by Exxon and Conoco. At the same time, the remaining companies stop investing capital because trust in the political and contractual framework is now compromised.
The result is that maintenance drops, systems degrade and production slowly but surely begins to collapse. Over time, from around three million barrels a day in those years, it dropped to less than a million. Without a solid industrial system, without a supply chain that works from start to finish, even the largest reserve on the planet remains just an untapped potential.
What is needed to increase Venezuela’s production
To increase production in the Orinoco area, technologies are needed, know-howpersonal and above all strong investments. How many? According to a 2021 report, 7-9 billion initial dollars in 2-3 years to bring production back to 2 million barrels per day, to which others can be added 20 billion dollars over the next 2-3 years to develop offshore fields and onshore projects. In this way it would be possible to reach 2.5 million barrels produced per day for the next 20-30 years.
