Filenews 6 January 2026 - by Haris Floudopoulos
Venezuela is the paradox of global oil geopolitics: it sits on the largest crude reserve on the planet, but produces and exports much less than the size of this wealth dictates. The reason has to do with the nature of the deposits (mainly extremely heavy oil), with the investments and know-how required, with the sanctions – and, of course, with the path of nationalization and renationalization that culminated under Hugo Chávez.
The "book" value: trillions... on paper
Based on data from the U.S. EIA, Venezuela had about 303 billion barrels of proven reserves in 2023, about 17% of the world's reserves, with most of it in the Orinoco Zone and being extra-heavy crude.
If someone multiplies "rawly" the 303 billion. barrels with a hypothetical oil price, dizzying numbers emerge:
- at $70/barrel → $21.21 trillion. dollars of "gross value"
- to $60/barrel → $18.18 trillion. dollars
- to $50/barrel → $15.15 trillion. dollars
But this figure is more of a theoretical than a realistic balance sheet of wealth. The real value of a field is not the "price per barrel", but the net present value (NPV): what remains after deducting production/upgrade, transportation, investments, implementation time, country risk, taxation/royalties, political risk and – in the case of Venezuela – the factor of sanctions and limited access to know-how/capital.
Why Venezuela is not Saudi Arabia
The heart of the reserves is in the Faja/Orinoco Belt, a vast area of about 55,000 sq.km. in eastern Venezuela, with reserves of extremely heavy crude that often require mixing with diluents and processing/upgrading to make them tradable on a large scale.
This translates to four value "cutters":
- High cost and high capital intensity (CAPEX) relative to light/medium crudes.
- Price discount (heavy discount) against Brent, which becomes even greater in times of restrictions/sanctions (discounts, difficulty in chartering/insurance, "shadow fleet", etc.).
- Need for know-how and services of oil companies/servicers, which the country has had difficulty keeping or attracting.
- Refining infrastructure: even the large refinery complex has been underperforming for years, limiting the internal "value chain".
These conditions are reflected in the country's actual production: the EIA records for 2023 a production of about 742 thousand. barrels/day, much lower than a decade ago.
Before Chávez: the first nationalization and the "Apertura"
The irony is that Venezuela's oil industry had been nationalized long before Chávez. In 1976 the country officially nationalized the industry and PDVSA was established, with the state gaining control of the concessions/operations.
In the 90s, however, the reality of mature fields and especially the "mountain" of extra-heavy Orinoco led to the opening to foreign players: the so-called Apertura Petrolera attracted international companies to heavy crude projects, precisely because PDVSA could not bear the technological/financial burden on its own.
The Chávez turn: from "openness" to "owner-state"
Hugo Chávez (elected in 1998, taken over in 1999) treated oil as a political tool of domination and redistribution. The "oil rent" was supposed to finance social programs and reduce dependence on "foreign interests". The conflict was not only economic; It was ideological.
A key point was the Hydrocarbons Law of 2001, which strengthened the role of the state/PDVSA in the control structure and laid the foundations for stricter conditions for private participation.
In the following years, the regime changed the fiscal terms in a more "statist" direction: increases in royalties/taxes, contract revisions and conversion of cooperation schemes, with the aim of a greater state take.
2007: the climax – the "renationalization" of Orinoco
2007 was the landmark year. The Chávez government demanded that the large foreign companies active in the Orinoco mega-projects accept the transformation of the schemes into mixed companies (empresas mixtas) with PDVSA in a position of majority and control.
Those who accepted were left with revised terms. Those who did not accept, left/were expelled: characteristically, ExxonMobil and ConocoPhillips abandoned projects instead of relinquishing control, opening a marathon of judicial/arbitration claims.
International arbitration sealed the cost of this move: Reuters has documented a ruling awarding Exxon about $908 million in one of the 2007 nationalization-related cases (with total claims much higher).
Because nationalization was a setback
Herein lies the crucial economic conclusion: the value of Venezuela's deposits did not decrease because oil "disappeared", but because the risk of never turning into a stable, long-term cash flow increased exponentially.
- The state got more control and a higher rate of rent in the short term.
- But the industry needs continuous reinvestment and technical proficiency to maintain/increase production, especially in extra-heavy fields. The EIA describes exactly this "noose": limited participation of international companies due to sanctions, fiscal suffocation of PDVSA and lack of qualified staff.
Simply put: you may have "the largest reserve", but if the framework does not allow for investment, technology, access to markets and fixed rules, the value remains theoretical – something that is also reflected in recent analyses of how difficult it is to translate inventory into a real supply shock.
The political imprint of Chávez's nationalization
The nationalization of 2007 was not an "isolated episode". It was the culmination of a strategy that:
- transformed PDVSA into an internal policy arm and main source of funding for the state, reducing reinvestment capacity;
- sent a message that contracts can be revised unilaterally, raising the country risk and the required "risk premium" for each new dollar,
- It led to years of legal disputes that, in addition to the direct cost of compensation, hurt the country's ability to "lock" partnerships with powerful international players.
In conclusion, Venezuela has an oil reserve that, in gross terms, is equivalent to tens of trillions of dollars. But its real value depends on parameters that remain unstable today: political/institutional credibility, investment/technical capacity and geopolitical access to markets.
