Published on Thursday, January 8 2026
Authors : Harold "Skip" York - Chief Energy Strategist

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

With the world’s largest proven oil reserves (estimated at over 300 billion barrels) the country’s potential to influence global energy markets remains considerable. Yet decades of mismanagement, infrastructure decay, political turmoil, and external pressure have shrunk production to a fraction of its former capacity. Today, Venezuela produces 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 Immediate Horizon: Political Transition and Policy Shifts

Political developments likely will continue to dominate the near-term trajectory of Venezuela’s oil industry. Replacing Maduro with (former) Vice President Delcy Rodríguez does not constitute regime change. However, some policy changes by President Rodríguez could open pathways for sanctions relief and renewed foreign investment. Our analysis suggests a stable, pro-investor government enacting comprehensive reforms and reestablishing trust to justify capital flows could more than double production over a decade.

In parallel, the U.S. appears intent on reshaping Venezuela’s oil sector. Proposals include possible reimbursement for U.S. oil companies that assist in rebuilding infrastructure and reviving output. However, many companies may remain cautious, wary of political risk, legal uncertainty, and the tainted legacy of asset seizures under past Venezuelan governments.

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

 Structural and Operational Challenges

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

	1.	Decaying Infrastructure and Resource Underinvestment Decades without adequate maintenance have left pipelines, upgraders, refineries and pumping systems in poor condition. One of the great unknowns is the actual condition of logistics assets. When sanctions against Iran were removed in 2016, production recovered much faster than expected because they kept their infrastructure in better shape than the market was aware.
	2.	Human Capital & Technical Capabilities The petroleum workforce has thinned due to economic collapse and emigration. Rebuilding operational capacity will require not only billions of dollars in equipment but also specialized technical expertise that may take years to restore.
	3.	Dependence on Diluents and Upgrader Capacity Venezuela’s extra-heavy crude cannot be exported without blending it with lighter oils. Past shortages and outages, for instance at upgraders, have revealed a fragile balance. Without the upgraders, exports hinge on diluent availability, a serious operational risk if Venezuela cannot secure reliable supplies.
	4.	Fuel Production and Supply Venezuela faces persistent domestic fuel shortages despite the availability of crude oil. The country operates five refineries, many of which are in severe disrepair after years of underinvestment and deferred maintenance. Industry assessments suggest that two to three refineries may be offline, while the Paraguana Refining Complex, which has historically been the core of Venezuela’s downstream system, is operating at roughly one-third of nameplate capacity. Local demand in recent years has been met by imports from countries such as Russia and Iran.

Key Risks on the Road Ahead
Venezuela’s oil industry revival remains challenging. Several systemic risks complicate the outlook:

	Geopolitical Risk: Even with a potential regime change, Venezuela’s place in the global energy order is subject to geopolitical contestation. The interplay of U.S., Chinese and Russian interests, each with oil and strategic interests in Venezuela, could fragment legal certainty and investment incentives.
	Sanctions Risks: While some sanctions are being recalibrated to allow limited foreign participation, others remain in force, including tariffs on nations importing Venezuelan crude and strict compliance regimes for energy companies. These constraints can deter investment and slow project execution.
	Internal Political Stability: At some point, Venezuela will have a new round of elections. Making sure those elections are free and transparent and that the leaders continue the policies critical to rebuilding the oil industry are essential to creating a political environment conducive to attracting foreign capital.
	Security and Operational Vulnerabilities: Venezuela’s oil assets are high-value targets for criminal activity, political unrest, and infrastructure sabotage. Ensuring the physical security of facilities, personnel, and supply chains will require substantial new investment and governance capacity.
	Economic and Market Risk: Global oil demand trends and oversupply conditions have prices under pressure. A successful Venezuelan comeback would add to supply in a market where OPEC+ and U.S. shale dynamics are shaping flows and margins.
	Environmental Considerations: Heavy crude is carbon-intensive so expanding Venezuelan output could factor into investor risk profiles particularly among European and U.S. financiers sensitive to ESG criteria. It is unclear how attractive the emission profile might be relative to other heavy crude oil jurisdictions, e.g., Canada.

Conclusion: Uncertain Potential in a Fragmented Landscape

The story of Venezuela’s oil industry in 2026 remains one of huge opportunity, structural fragility, and high geopolitical stakes. A political transition could unlock latent value and attract the investment needed to increase production, reduce discounts on crude, and restore the sector’s global relevance. But even with favorable policy shifts, Venezuela faces multifaceted hurdles including decaying infrastructure, legal risks, workforce shortages, and geopolitical friction.

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

For the downstream, restarting the refining system is unlikely to be immediate given the need for expensive repairs and infusion of highly skilled labor to operate and maintain facilities to achieve basic operability, let alone running at higher utilization or meeting modern reliability standards. Consequently, downstream rehabilitation is likely to be a multi-year, capital-intensive process that materially influences the pace and economics of any Venezuelan fuel production recovery.

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