Venezuelan Oil Market Is Reopening


Oil rigs and Venezuelan flag | Image by Anton_Medvedev/Shutterstock

After more than a decade, connections between the U.S. and Venezuelan oil industry look set to be revived.

In 2001, Venezuela, which holds some of the world’s largest oil and gas reserves, was the wealthiest country in South America, driven by its prosperous oil industry. 

Following a strike in 2002-2003, President Hugo Chavez decided to fire thousands of workers from the national oil company, Petróleos de Venezuela SA (PdVSA), which resulted in a vacuum of workers with technical expertise. 

In 2007, Chavez nationalized the country’s assets, causing American companies working there, like ConocoPhillips, to abandon the country. By the time Chavez left office in 2013, Venezuela’s strategic petroleum reserves had dwindled, and the government debt had doubled. 

Venezuela is now the poorest country in Latin America, with 94.5% of its population in poverty, according to Caracas Chronicles. 

In 2022, U.S. President Joe Biden eased sanctions on Venezuelan oil, enabling Chevron to resume its operations in the country, according to NPR.

Since then, U.S. and European oil companies have been lobbying the U.S. for clearance to pump oil, according to The Wall Street Journal.

ConocoPhillips is discussing a deal to sell Venezuela’s oil to the U.S. to recover the $10 billion America is owed by Venezuela, the WSJ reported. 

Venezuela’s national oil company has drawn criticism for its lack of regulatory oversight regarding pollution. 

Morningstar Sustainalytics rated the PdVSA as a “severe risk” because of its management of environmental problems.

“[PdVSA] is focused on squeezing out any production they can, rather than tending to the environmental situation,” Ausberto Quero, an expert on the oil industry’s environmental impact, told the WSJ. 

Quero said oil spills and leaks are constant because there are no workers to manage them, per the WSJ.

The PdVSA has not reported information on oil spills and workplace accidents since 2016. During that year, Venezuela recorded over 8,000 oil spills, four times more than in 1999 when it produced a greater output of oil, according to the WSJ.  

Since there are no official data, advocacy groups track oil spills through social media and local news reports, reported the WSJ.

“We are completely in the dark when it comes to hard scientific information about the environment in Venezuela,” environmental researcher Bram Ebus told the WSJ. 

The country is susceptible to oil spills because of its aging oil production infrastructure, said one oil and gas expert who strongly opposed the U.S. decision to use Venezuelan oil. 

“Venezuela’s extraction, refining, and transporting technology is decades behind the rest of the world. Texas produces the most environmentally responsible oil and gas globally,” Richard Welch told The Dallas Express.

“Buying crude from Venezuela is environmentally, financially, and morally irresponsible for any country. If the government allowed the U.S. oil and gas companies to produce enough crude to replace Venezuela’s production capacity, the global emissions would drop by billions of metric tons of greenhouse gases per year,” Welch added.

Welch said Venezuela currently emits over 105 megatons of CO2 per year. 

Western companies looking to return to business in Venezuela could bring higher environmental and safety standards that would help clean up the industry there, per the WSJ. 

“The sheer nature of the international standards and compliance factors of those firms will translate to their operations in Venezuela,” Jeremy Martin, vice president of energy and sustainability at the Institute of the Americas think tank, said, according to the WSJ. “Western firms and contractors adhering to ESG [environmental, social and corporate-governance issues] and compliance factors will accelerate the positive impact.”

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