Following the January 3rd US intervention in Venezuela, which ended President Nicolas Maduro’s 13-year dictatorship, all eyes are on the South American country’s oil industry. Once one of the world’s largest oil producers, production has declined in recent years. However, with US President Trump setting his sights on Venezuela’s crude oil, many are speculating on how soon its resources could be used up. While the focus is on Venezuela’s potential as an oil powerhouse, others think success could soon be seen in the exploitation of gas fields.
Venezuela has the largest oil reserves in the world, with an estimated 300 billion barrels. However, years of underinvestment and mismanagement have led to a significant drop in productivity. Recent US intervention in the South American country has attracted renewed investor interest in its energy market, as President Trump has pledged to rapidly develop Venezuela’s long-overlooked oil reserves.
On February 13, the White House issued a press release stating, “The Trump administration is rapidly implementing President Trump’s vision to reopen and develop Venezuela’s oil industry in the mutual interest of the U.S. and Venezuelan people. Thanks to President Trump’s leadership, the United States has already issued several general licenses to oil and gas companies at a record pace to prevent illegal investment in Venezuela’s energy sector.”
“Venezuela has tremendous economic potential, but years of instability, corruption, and economic mismanagement have limited the nation’s growth and prosperity. These general licenses invite U.S. and other allied companies to play a constructive role in supporting economic recovery and responsible investment,” the statement said.
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While the world is eyeing Venezuela’s untapped oil, some believe there may be more medium-term potential to exploit its natural gas reserves. Much of Venezuela’s gas remains deep beneath the ocean floor. While these deposits were first discovered decades ago, near the country’s east coast, on the border with Trinidad and Tobago, the Venezuelan government has largely abandoned them to focus on oil production.
Several major oil companies, such as Shell, have already approached Venezuela for a stake in its gas business, even as interest in the country’s oil industry has waned due to geopolitical instability and US sanctions. For years, U.S. sanctions on Venezuela’s government and its state-owned oil company, Petroleos de Venezuela, have limited the development of its gas industry. In addition, developing the natural gas industry will require cooperation with neighboring Trinidad and Tobago.
Trinidad and Tobago already has the necessary infrastructure to ship and export oil onshore, which Venezuela does not. If the two countries develop an energy partnership, Trinidad’s existing infrastructure could help Venezuela rapidly develop its gas industry. However, the two powers, separated by language (Spanish and English), have deteriorated relations in recent years. Trinidad and Tobago generally supports the United States when it comes to Maduro’s presidency and the decision to impose sanctions on Venezuelan energy.
Venezuela’s biggest natural gas potential is the large Dragon oil field, as it is close to being developed. The Venezuelan government has already conducted exploration activities in the area but was unable to recover the gas buried there due to lack of funding to continue exploration. These efforts were further hampered by the sinking of an exploration rig in 2010.
In 2023, the Venezuelan government signed an agreement with Shell, allowing the foreign company to explore the Dragon field. The plan was to build a short pipeline between Dragon and Shell’s existing infrastructure on the island of Trinidad, rather than starting from scratch in Venezuela.
If Shell develops Dragon, the field is expected to generate about $500 million a year in revenue, based on current natural gas prices, with at least 45 percent going to Venezuela in the form of taxes and royalties. “These are opportunities that could be activated in a matter of months over the next few years with potentially several billion dollars of investment and production,” Shell Chief Executive Officer Wail Sawan told CNBC.
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U.S. Energy Secretary Chris Wright said promoting regional natural gas cooperation could be “a real potential win for Trinidad and Tobago, a win for the global LNG market, a win for Venezuela.”
Meanwhile, BP is pursuing another Venezuelan gas project, known as Coquina, which could make more easing of U.S. sanctions possible. In late February, the US Treasury Department appeared to be giving oil and gas companies more interest in negotiating with Venezuela and working in the South American country. “They’re creating an environment that allows existing actors to operate,” said Rachel Ziemba, a fellow senior fellow at the Center for a New American Security.
While President Trump is eyeing the long-term development of Venezuela’s oil industry, some international oil companies may be more interested in the South American country’s natural gas potential. Resource development will likely require cooperation with neighboring Trinidad and Tobago, and could lead to the development of a new Latin American-Caribbean regional energy hub.
By Felicity Bradstock for Oilprice.com
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