After the Shift in the World's No. 1 Oil Reserve Nation, Who Might Become the Biggest Winner in Venezuela's Oil Market?

TradingKey - U.S. President Donald Trump stated on Tuesday evening that the interim Venezuelan authorities would deliver 30 million to 50 million barrels of crude oil to the United States.

Trump posted on social media that the oil would be sold at market prices, adding, "The money will be controlled by me, as President of the United States of America, to ensure it benefits the people of Venezuela and the United States!"

Previously, in the early morning of January 3, U.S. forces suddenly initiated a military intervention in Caracas, Venezuela's capital, successfully apprehending President Nicolás Maduro and his wife and removing them from the country. Following this, U.S. President Trump issued a statement announcing that the U.S. would "temporarily manage" Venezuelan affairs until a "safe and reliable" political transition was achieved.

As geopolitical dynamics undergo a sudden shift, the U.S. energy landscape in Venezuela is experiencing profound changes.

Following the sudden detention of Venezuelan President Maduro orchestrated by the U.S., the U.S. government openly stated its readiness to restart energy relations with the country and plans to promote a large-scale return of U.S. companies to the nation boasting the world's largest oil reserves.

The U.S. is poised to restore its deep connection with Venezuela's oil industry, which could be a "delayed dividend" for U.S. refiners, long established along the Gulf Coast and equipped to process complex heavy crude oil.

Why does Trump want Venezuela's oil?

Superficially, this military intervention concerns existing supply security, but fundamentally, it targets Venezuela's immense resource potential.

Over the past few decades, due to aging facilities, management disarray, and U.S.-European sanctions, multiple international oil companies were forced to withdraw, causing its daily production to plummet from a peak of over 3.7 million barrels in the 1970s to less than 1 million barrels currently.

This has made the U.S. government—and particularly Trump himself—more actively advocate for rebuilding the local energy system through capital and technology to reshape commercial interests.

In fact, Trump does not conceal his intentions.

He openly stated that the U.S. would guide its major oil companies to invest in Venezuela and rebuild infrastructure to achieve "value output" for the U.S. economy. He also announced at a press conference that the U.S. is prepared to support these companies' participation in local projects through subsidies or revenue-sharing mechanisms.

French economist Lucas Chancel noted, "Trump knows very well: whoever controls energy controls the world." He believes this military intervention is not a break from precedent but rather a strategic realignment amidst the current tightening resource landscape.

He particularly emphasized, "The truly novel aspect of this event is not the intervention itself, but that cheap global oil is gradually depleting, and the U.S. is no exception." He views this as a form of protection, with state power supporting traditional U.S. energy interests.

The U.S. is currently the world's largest oil producer, having dominated the market since the full-scale shale revolution erupted in the 2010s.

However, problems are emerging; as development becomes more challenging, the average cost of domestic crude oil extraction in the U.S. is steadily rising, currently around $70 per barrel, with predictions suggesting it could increase to $95 per barrel by the 2030s. This implies minimal profit margins for many proposed new projects.

In contrast, despite outdated equipment and a lagging workforce, Venezuela's vast mining regions hold immense potential, with relatively mature extraction and conversion technologies, offering strong appeal from a long-term financial return perspective. Consequently, the region has become a key candidate for U.S. companies seeking alternative supply solutions.

U.S. Refiners Poised to Be Major Beneficiaries in Venezuelan Oil Market

Venezuela is believed to possess the world's largest proven oil reserves, estimated at up to 303 billion barrels. However, most of these resources are heavy, high-sulfur crude oil, which is viscous and dense, presenting significant technical hurdles for transportation and extraction. Compared to light, sweet crude oil (such as WTI), its processing costs and complexity are higher.

However, large refineries along the U.S. Gulf Coast have been tailored for such feedstock for years. Even before the shale revolution, approximately 70% of the refining equipment in the region was designed to process heavy crude oil like that from Western Canada and Venezuela.

Rebecca Babin, Senior Energy Trader at CIBC, noted, "Venezuelan crude oil is very heavy and requires more complex pumping and refining systems—all of which add to costs."

She further added, "From a strategic perspective, this crude oil is highly suitable for U.S. Gulf Coast refineries specialized in processing heavy crude, which could reduce reliance on Canadian supplies... Refineries are watching this closely."

In fact, between 1990 and 2010, major U.S. companies collectively deployed over $100 billion to support such complementary supplies.

Although subsequently impacted by the counter-trend of the shale boom, some projects that did not yield expected returns are now being re-evaluated.

Debnil Chowdhury, Regional Head of S&P Global Energy, stated, "This will finally allow for some return on investment." He added, "For the past 10 to 15 years, our system's overall operational level has been far from its design targets. But now, it can finally approach the production efficiency initially envisioned."

This type of heavy, disadvantaged resource also has some economic appeal due to its lower price.

Mark Malek, Chief Investment Officer at Siebert Financial, stated, "Heavy, high-sulfur crude oil almost always trades at a discount to light, sweet crude." He further emphasized, "If you can process it efficiently, that price discount translates into profit."

Independent energy consultant Norma Mozée noted that due to the complex processing chain, U.S. companies are accustomed to establishing internal vertical collaborative control, making them better equipped to leverage the value of such resources. "Gulf Coast facilities have strong processing adaptability and will directly benefit from the re-established supply chain."

At the same time, she conceded that Venezuela's internal operational status is currently severe, with "five core production lines essentially near paralysis," and cited industry research estimating that "restoring to 80% of normal levels would require at least over ten billion dollars."

Although the recovery of Venezuela's oil production by U.S. companies may take time, Gulf Coast refiners are well-prepared to quickly procure crude oil once sanctions are eased and import licenses become more plentiful. This is why the energy sector widely anticipates that the U.S. Gulf Coast region will be one of the biggest beneficiaries in the initial phase of reopening.

"In the short term, Gulf Coast refiners are likely to be among the biggest beneficiaries of this policy shift," stated Dylan White, principal analyst for North American crude markets at Wood Mackenzie.

"Investment progress in Venezuela will be much slower. It's like a slow-turning ship, requiring high-level decisions from multiple companies," he said. "However, a change in U.S. sanctions policy could alter the economic interests of U.S. Gulf Coast refiners as early as tomorrow."

The key lies with oilfield service companies.

Of course, the economic benefits from this reconstruction project will not be limited to upstream oil producers; they are likely to extend to a broader range of U.S. and international companies.

In addition to classic international oil majors like Chevron, ExxonMobil, and ConocoPhillips potentially re-entering the market, several leading global oilfield service companies are also expected to quickly become major beneficiaries. These include Schlumberger (SLB), Halliburton (HAL), Baker Hughes (BKR), and National Oilwell Varco (NOV), among others.

Currently, Venezuela's domestic crude oil production system is in long-term stagnation, with numerous facilities suffering structural damage due to severe aging and years of neglect. For the goal of restoring stable production, relying solely on resource reserves is by no means a solution. In the initial phase of reopening, it will be less about "large-scale production" and more about "large-scale renovation"—this is a crucial opportunity for service companies, whose core strength lies in engineering technology, to intervene early.

From the refurbishment of numerous decommissioned drilling rigs and the replacement of electric pump systems to the customization of heavy crude oil transportation solutions and the deployment of safety systems and remote intelligent operation and maintenance platforms, in these segments highly dependent on specialized technical support and personnel input, the severe shortage of local engineers forces Venezuela to rely more heavily on foreign investment.

Against the backdrop of PDVSA's stretched capabilities and limited funding, this implies that more future projects will involve private or even multinational teams through contract outsourcing, joint venture partnerships, and other arrangements, offering an opening for industry giants and mid-sized equipment providers.

"In a situation like Venezuela, understanding the actual value of the equipment and the economic viability of repairing it becomes key to investment," said an analyst at a U.S.-based industrial valuation firm.