Venezuela’s oil industry sits at apivotal moment in its modern history. The arrest of President Nicolás Maduro byU.S. forces on January 3 raises fundamental questions but could be a first stepin a return to significance of Venezuela’s energy sector.

With the world’s largest proven oilreserves (estimated at over 300 billion barrels) the country’s potential toinfluence global energy markets remains considerable. Yet decades ofmismanagement, infrastructure decay, political turmoil, and external pressurehave shrunk production to a fraction of its former capacity. Today, Venezuelaproduces close to 1.0 MMBPD, less than one-third of its level during the 1990s,and a tiny share of global supply, despite its vast reserves.

The ImmediateHorizon: Political Transition and Policy Shifts

Political developments likely will continueto dominate the near-term trajectory of Venezuela’s oil industry. ReplacingMaduro with (former) Vice President Delcy Rodríguez does not constitute regimechange. However, some policy changes by President Rodríguez could open pathwaysfor sanctions relief and renewed foreign investment. Our analysis suggests astable, pro-investor government enacting comprehensive reforms and reestablishingtrust to justify capital flows could more than double production over a decade.

In parallel, the U.S. appears intenton reshaping Venezuela’s oil sector. Proposals include possible reimbursementfor U.S. oil companies that assist in rebuilding infrastructure and revivingoutput. However, many companies may remain cautious, wary of political risk,legal uncertainty, and the tainted legacy of asset seizures under pastVenezuelan governments.

So far, the impact on oil prices hasbeen muted as the market expects the current global oversupply conditions andbroader market dynamics could temper any near-term risk of production loss.However, energy stock prices rose amid speculation of an eventual increase inVenezuelan supply potential.

Structural andOperational Challenges

Even with a favorable political transition,the practical work of revitalizing Venezuela’s oil industry is daunting.

1.   Decaying Infrastructure and Resource Underinvestment

Decadeswithout adequate maintenance have left pipelines, upgraders, refineries andpumping systems in poor condition. One of the great unknowns is the actualcondition of logistics assets. After sanctions against Iran were lifted in 2016,production recovered much faster than expected because the country hadmaintained its infrastructure in better condition than the market realized.  

2.   Human Capital & Technical Capabilities

Thepetroleum workforce, in both numbers and expertise, has thinned due to economiccollapse and emigration. Rebuilding operational capacity will require not onlybillions of dollars in equipment but also specialized technical expertise thatmay take years to restore.

3.   Dependence on Diluents and Upgrader Capacity

Venezuela’sextra-heavy crude cannot be exported without blending it with lighter oils.Past shortages and outages, for instance at upgraders, have revealed a fragilebalance. Only one of the country’s four heavy-oil upgraders is believed to berunning, further limiting processing flexibility. Without the upgraders, exportshinge on diluent availability, a serious operational risk if Venezuela cannotsecure reliable supplies.

4.   Fuel Production and Supply  

Venezuelafaces persistent domestic fuel shortages despite the availability of crude oil.The country operates five refineries, many of which are in severe disrepairafter years of underinvestment and deferred maintenance. Industry assessmentssuggest that two to three refineries may be offline, while the ParaguanaRefining Complex, which has historically been the core of Venezuela’sdownstream system, is operating at roughly one-third of nameplate capacity. Localdemand in recent years has been met by imports from countries such as Russiaand Iran.

Key Risks on theRoad Ahead

Venezuela’s oil industry revival remainschallenging. Several systemic risks complicate the outlook:

Geopolitical Risk: Even with a potential regime change, Venezuela’s place inthe global energy order is subject to geopolitical contestation. The interplayof U.S., Chinese and Russian interests, each with oil and strategic interestsin Venezuela, could fragment legal certainty and investment incentives.

Sanctions Risks: While some sanctions are being recalibrated to allowlimited foreign participation, others remain in force, including tariffs onnations importing Venezuelan crude and strict compliance regimes for energycompanies. These constraints can deter investment and slow project execution.

Internal Political Stability: At some point, Venezuela will have anew round of elections. Making sure those elections are free and transparentand that the leaders continue the policies critical to rebuilding the oilindustry are essential to creating a political environment conducive toattracting foreign capital.

Security and Operational Vulnerabilities: Venezuela’s oil assets are high-valuetargets for criminal activity, political unrest, and infrastructure sabotage.Ensuring the physical security of facilities, personnel, and supply chains willrequire substantial new investment and governance capacity.

Economic and Market Risk: Global oil demand trends and oversupply conditions haveprices under pressure. A successful Venezuelan comeback would add to supply ina market where OPEC+ and U.S. shale dynamics are shaping flows and margins.

Environmental Considerations: Heavy crude is carbon-intensive soexpanding Venezuelan output could factor into investor risk profilesparticularly among European and U.S. financiers sensitive to ESG criteria. Itis unclear how attractive the emission profile might be relative to other heavycrude oil jurisdictions, e.g., Canada.

Conclusion:Uncertain Potential in a Fragmented Landscape

The story of Venezuela’s oil industryin 2026 remains one of huge opportunity, structural fragility, and highgeopolitical stakes. A political transition could unlock latent value andattract the investment needed to increase production, reduce discounts oncrude, and restore the sector’s global relevance. But even with favorablepolicy shifts, Venezuela faces multifaceted hurdles including decayinginfrastructure, legal risks, workforce shortages, and geopolitical friction.

For the upstream sector, a return of politicalstability and adherence to rule of law could attract oil majors to invest capitaland technological know-how, which would significantly increase the prospects ofhigher, sustainable oil production growth. Current oil prices are not likely tobe a major driver of attractiveness as it will take years to bring a Venezuelanproject into a company’s production portfolio.

For the downstream, restarting therefining system is unlikely to be immediate given the need for expensiverepairs and infusion of highly skilled labor to operate and maintain facilitiesto achieve basic operability, let alone running at higher utilization ormeeting modern reliability standards. Consequently, downstream rehabilitationis likely to be a multi-year, capital-intensive process that materiallyinfluences the pace and economics of any Venezuelan fuel production recovery.

A revived Venezuela could eventually returnto prominence in global oil markets, but the path is long, risky, and tightlybound to broader political and economic transformations.

‍