Following the United States intervention in Venezuela on January 3, which put an end to President Nicolás Maduro’s 13-year dictatorship, all eyes have focused on the South American country’s oil industry. Once one of the world’s largest oil producers, production has declined in recent years. However, now that US President Trump sets his sights on Venezuelan crude oil, many are speculating how quickly its resources can be tapped. While attention is focused on Venezuela’s potential as an oil power, others think more immediate success can be seen in the exploitation of its gas fields.
Venezuela is home to the largest oil reserves in the world, with an estimated 300 billion barrels. However, years of underinvestment and mismanagement have led to a significant reduction in production. The recent US intervention in the South American country has attracted new investor interest in its energy market, as President Trump promises to quickly rebuild Venezuela’s long-neglected oil resources.
On February 13, the White House issued a press release saying: “The Trump Administration is rapidly implementing President Trump’s vision to reopen and develop Venezuela’s oil industry for the shared benefit of the American and Venezuelan people. Thanks to President Trump’s leadership, the United States has already issued several general licenses at record speed for oil and gas companies to make unprecedented investments in Venezuela’s energy infrastructure.”
The statement goes on to say: “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 aligned businesses to play a constructive role in supporting economic recovery and responsible investment.”
Related: Inside North America’s first fully integrated rare earth facility
As the world watches Venezuela’s untapped oil, some believe there may be greater medium-term potential in exploiting its natural gas reserves. Most of Venezuela’s gas is trapped deep under the seafloor. While these reserves were first discovered several decades ago, off the country’s eastern coast along the border with Trinidad and Tobago, the Venezuelan government left them largely untouched while it focused its attention on oil production.
Several oil majors, such as Shell, have previously approached Venezuela for a stake in its gas business, even as interest in the country’s oil industry was waning due to geopolitical instability and US sanctions. For years, U.S. sanctions on the Venezuelan government and its state oil company, Petróleos de Venezuela, have restricted the development of its gas industry. Additionally, developing its natural gas industry would require cooperation with neighboring Trinidad and Tobago.
Trinidad and Tobago already has the necessary infrastructure to transport fuel ashore and export it, something that Venezuela does not have. If the two countries were to establish an energy partnership, Trinidad’s pre-existing infrastructure could help Venezuela develop its gas industry more quickly. However, the two powers, which are separated by language (Spanish and English), have had a tense relationship in recent years. Trinidad and Tobago has generally sided with the United States when it comes to Maduro’s presidency and the decision to impose sanctions on Venezuelan energy.
Venezuela’s largest natural gas prospect is the gigantic Dragon oil field, as it is the closest to being developed. The Venezuelan government previously carried out exploration activities in the field but was unable to recover the gas buried there due to a lack of funds to continue exploration. These efforts were further undermined by the sinking of an exploration platform in 2010.
In 2023, the Venezuelan government reached an agreement with Shell, which allowed 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, of which at least 45 percent is expected to go to Venezuela in the form of taxes and royalties. “These are opportunities that could potentially be activated within months, with potentially a few billion dollars in investment and production over the next few years,” Shell CEO Wael Sawan told CNBC.
Related: How China’s Rare Earth Ban Backfired and Became a US Technological Breakthrough
U.S. Energy Secretary Chris Wright said the development of a regional collaboration on natural gas could be “a real potential benefit for Trinidad and Tobago, a benefit for the global LNG market, a benefit for Venezuela.”
Meanwhile, BP is pursuing another Venezuelan gas project, a field known as Cocuina, which greater leniency in the face of U.S. sanctions could make possible. In late February, the US Treasury Department appeared to give oil and gas companies more leeway to negotiate with Venezuela and operate in the South American country. “They are creating an environment that allows existing actors to operate,” said Rachel Ziemba, a research associate at the Center for a New American Security.
While President Trump is considering long-term oil industry development in Venezuela, some international oil majors may be more interested in the South American country’s natural gas potential. Development of the resource will likely require collaboration with neighboring Trinidad and Tobago, and could lead to the development of a new Latin American and Caribbean regional energy hub.
By Felicity Bradstock for Oilprice.com
More Oilprice.com Top Reads
Oilprice Intelligence gives you the signals before they become headline news. This is the same expert analysis read by veteran traders and political advisors. Get it for free, twice a week, and you’ll always know why the market moves before everyone else.
You’ll get the geopolitical intelligence, hidden inventory data, and market rumors that move billions, and we’ll send you $389 in premium energy intelligence, on us, just for subscribing. Join over 400,000 readers today. Get access immediately by clicking here.
