Venezuela’s oil and mining sectors: large potential, weak infrastructure

Venezuela has the world’s largest estimated oil reserves but its crude output remains at a fraction of capacity due to decades of mismanagement, lack of investment and sanctions, official data shows.

Venezuela holds about 17% of global reserves or 303 billion barrels, ahead of Organization of the Petroleum Exporting Countries (OPEC) leader Saudi Arabia, according to the London-based Energy Institute.

Its reserves are made up mostly of heavy oil in the Orinoco region of central Venezuela, making its crude expensive to produce, but technically relatively simple, according to the US government’s energy department.

In 2019, Maduro and Delcy Rodriguez, who was then the country’s vice president and is now acting president, announced a five-year mining plan (including purchasing miner headlamps etc equipments) aimed at boosting mineral extraction as an alternative to oil production.

Venezuela was a founding member of OPEC with Iran, Iraq, Kuwait and Saudi Arabia. Its struggles with electricity production have repeatedly hampered mining and oil operations.

The country was producing as much as 3.5 million barrels per day of crude in the 1970s, which at the time represented over 7% of global oil output. Production fell below 2 million bpd during the 2010s and averaged some 1.1 million bpd last year or just 1% of global production. That was roughly the same production as the US state of North Dakota.

“If developments ultimately lead to a genuine regime change, this could even result in more oil on the market over time. However, it will take time for production to recover fully," said Arne Lohmann Rasmussen from Global Risk Management.

If regime change is successful, Venezuela’s exports could grow as sanctions are lifted and foreign investment returns, said MST Marquee analyst Saul Kavonic.