Dense, sticky and heavy: why Venezuelan crude oil appeals to US refineries
South American nation’s tar-like oil is what many Gulf coast facilities were built for but ramping up production to 3m barrels a day will be a long game
Clustered along the US Gulf coast are some of the largest and most complex heavy-oil refineries in the world. These sprawling industrial hubs, owned by major US oil companies, stand ready to emerge as some of the major victors of Donald Trump’s
swoop on Venezuela.
In some ways, these refineries are a relic of another time; built to process the heavy, unctuous crude imported from Latin America before the boom in lighter US shale oil emerged earlier this century.
Venezuelan oil is particularly dense and sticky. The high-sulphur crude more closely resembles a semi-solid tar than the far clearer liquids produced in US shale heartlands, making it more difficult to extract and process into gasoline, diesel, jet fuel and feedstock for the chemicals industry. But it is exactly what many refineries in the US were built to treat.
As a result, the US remains a major importer of crude to feed its refineries, despite being one of the biggest oil exporters in the world. Access to Venezuelan crude at an attractive price could play an important role in sating Trump’s appetite for cheap energy to fuel the “reindustrialisation” of the US economy.
“Most of Venezuela’s crude supply is heavy, sour oil, which if you’re a US refiner is one of the most ideal grades of crude you could ask for,” said Janiv Shah, a vice-president at Rystad Energy, a global consultancy.
“At the moment, US refineries import heavy crude into the Gulf states via pipeline from Canada and there are also heavy crude options from Colombia and Mexico. But securing Venezuelan crude would be in addition to these, and the geographic proximity of Venezuela helps too.”
It could help to safeguard the US oil industry, which has struggled despite support from the White House against
the steepest decline in global oil prices since before the 2020 pandemic, made worse by the economic impact of Trump’s trade war.
US refineries support about 3m jobs despite employing only about 80,000 people at their sites. The industry has the highest job “multiplier” of any industry in the US – meaning that for every direct job in the sector more than 45 further roles are supported, according to a study by Oxford Economics. This reflects the industry’s “exceptionally high labour productivity and large economic footprint”, which is often rooted geographically in states loyal to Trump.
But during
Nicolás Maduro’s presidency, imports of Venezuelan crude to the US refineries fell as the South American nation’s industry suffered from neglect and corruption, and US sanctions against the regime took effect.
In the late 1990s US imports of Venezuelan crude reached almost 2m barrels of oil a day, more than half of the South American country’s output. At the end of last year US imports from Venezuela were just 135,000 barrels a day.
This suggests that US refineries could readily receive an extra 1m barrels a day from Venezuela, according to analysts at Energy Aspects, helping the US to reduce its reliance on more expensive imports of heavy crude from Canada.
This could divert Venezuela’s cheaper heavy oil exports away from China, which has absorbed most of the country’s crude since the US imposed sanctions on its exports as repayment on the billions in financial support extended to the Venezuelan government over recent years.
These imports represent a small fraction of China’s oil consumption, which could be easily replaced from other sources. However, the US intervention will force its global rival to pay a higher price for energy at a time both major economies are chasing the cheapest energy possible to fuel economic growth.
“This is part of Trump’s view that almost any issue can be solved by making the cost of energy cheaper so that prices for consumers across the economy fall too,” Shah said. “It is also Trump flexing the US’s muscles on the global stage against one of its greatest global rivals. China could source crude from elsewhere, but this move is politically symbolic.”
The gamble is a long game, with no guarantee of success. Returning Venezuela’s crude production to 3m barrels of oil a day would require 16 years of work and investment totalling $185bn (£137bn), according to figures from Rystad Energy, a global consultancy.
At least $30-35bn of international capital would need to be committed in the next two to three years to make this scenario plausible, Rystad said. “This could only be financed by international oil companies, which will consider investments in Venezuela only if they have full confidence in the stability of the country’s systems and its investment climate for international oil and gas players,” it added.
The global oil market responded to Trump’s plan to extract a
“tremendous amount of wealth” from Venezuela’s oil industry with significantly less drama than the events of recent days.
Less than 48 hours after Trump called for America’s biggest oil companies to reignite Venezuela’s struggling oil industry, the global oil market barely budged. The international benchmark rose slightly to just over $60.50 a barrel on Monday morning, after briefly falling below $60 a barrel late last year, although shares in the US oil majors Chevron and Exxon Mobil rose by more than 3% and 6% respectively.
“A rapid recovery in Venezuelan oil production in the short term is highly unlikely,” said Jorge León, the head of geopolitical analysis at Rystad. “Years of chronic underinvestment have severely eroded oil infrastructure, much of the skilled workforce has left the country, and ongoing political instability continues to undermine operational confidence.
“Even under a more constructive political scenario, rebuilding output would require significant time, capital, and institutional stability, making it difficult for international companies to justify new investments in Venezuela at present.”
South American nation’s tar-like oil is what many Gulf coast facilities were built for but ramping up production to 3m barrels a day will be a long game
www.theguardian.com
Oil riches and production ruin
Venezuela sits atop an estimated
303 billion barrels of proven oil reserves, about 17 percent of the global total and more than Saudi Arabia, whose reserves stand at about 267 billion barrels.
Yet, oil production by the two nations tells a starkly different story.
According to data from the Organization of the Petroleum Exporting Countries (OPEC), Venezuela produced 934,000 barrels per day in November, less than 1 percent of global demand and a shadow of the more than 3 million barrels a day it used to pump in the late 1990s and early 2000s.
The drop-off began under former President Hugo Chavez and carried on with Maduro. Then came
US sanctions in January 2019 on Maduro’s second inauguration as president.
The sanctions were aimed at forcing a change in Venezuela’s government. Their core mechanism was to sever the state’s oil income by closing a critical loophole – oil-for-debt swaps – that triggered the final, steep collapse of the country’s economy and oil industry.
The US also imposed a full embargo on all transactions with the PDVSA, Venezuela’s state oil company, threatening secondary sanctions on any foreign entity doing business with it. The sanctions halted oil exports to Venezuela’s key remaining markets like India and the European Union, and prevented the import of diluent chemicals needed to process Venezuela’s heavy crude.
So when the Venezuelan government was starved of its source of hard currency, it resorted to having the central bank print more money, triggering a wave of hyperinflation that obliterated salaries and savings. The ensuing humanitarian crisis was a primary driver behind the mass exodus of nearly 8 million Venezuelans that began in 2019.
Carole Nakhle, CEO of Crystol Energy, an energy advisory firm, said Venezuela’s oil industry was already hollowed out long before the sanctions.
“The collapse predates sanctions,” she told Al Jazeera. “Chronic mismanagement, politicisation and underinvestment weakened the industry long before restrictions were imposed. Sanctions then accelerated and deepened the decline by restricting finance, operations and market access.”
Years of capital flight, loss of technical expertise and decaying infrastructure left PDVSA struggling to maintain even basic operations.
Why didn’t the markets panic?
Despite the US military intervention, oil prices fell. Brent crude slipped to about $60 a barrel while West Texas intermediate (WTI) dropped below $58. On Monday, oil stocks dipped in the Asian markets as investors weighed the impact of the US abduction of Maduro.
The explanation behind the drop lies in oversupply.
New barrels are entering the market from Brazil, Guyana, Argentina and the US. OPEC+ has begun unwinding voluntary cuts totalling nearly 4 million barrels a day while the International Energy Agency projected supply could exceed demand by as much as 2 million barrels per day in 2026.
The markets’ lack of reaction allows the US intervention to be framed as a clean, surgical and necessary act. It masks the long-term reality.
Rebuilding Venezuela’s oil industry is the work of a decade, requiring hundreds of billions of dollars in investment and technological transfers that its new US-aligned managers will be eager to provide. When those barrels finally come, they will aim to structurally weaken OPEC+ and, as some analysts predicted, deliberately crash prices to cripple rivals like Russia.
Cornelia Meyer, chairperson and chief economist of LBV Asset Management, said expectations of a near-term Venezuelan shock are misplaced.
“Even a full return of sanctioned Venezuelan barrels would represent less than 1 percent of global supply,” she told Al Jazeera. “Markets would absorb it rather than be flooded by it.”
The ‘kind of oil’ that still matters
Yet Venezuela’s significance is not about volume alone. It is about quality.
Most Venezuelan crude is “heavy”, similar to that from Canada’s tar sands. Many US Gulf Coast refineries were originally built to process this type of oil. While some have adapted over time, heavy crude remains critical to the US refining system.
Despite being the world’s largest oil producer, the US still imports large quantities of crude. About 70 percent of US crude imports are heavy oil, and roughly 60 percent of that comes from Canada.
Nakhle noted that this is where Venezuela could re-enter the system – slowly.
“A meaningful short-term increase is unlikely,” she said. “Activity is largely limited to stabilising existing output. Any material growth would require sustained capital, technology transfer and institutional reform.”
Not everyone shares that caution.
Tony Franjie, head of energy fundamentals at SynMax Intelligence, believes the US intervention will fundamentally change the trajectory of the oil market.
“I would not underestimate the ability of US oil companies to increase Venezuelan production faster than anyone predicts,” he told Al Jazeera. “Chevron will be the main player, and these refineries were built for Venezuelan crude.”
“Get ready for sub-$50 WTI,” he said. “The oil market is already oversupplied, and this just adds pressure.”
Franjie argued that Venezuela’s return could push oil prices sharply lower and Canada would be the biggest casualty.
Meyer, however, remained sceptical. “Upstream production is not a light switch,” she cautioned. “Even with political change, infrastructure constraints do not disappear overnight.”
For oil markets, Venezuela is a footnote in an age of abundance. For Middle East, the US move is a dangerous reminder.
www.aljazeera.com
I have to point out that, even Trump repeated emphasis on the significance of the venezuela oil resource to US, it is hard to transform into long-term benefits.
One reason is the oil price had been into the low period, revenue from mining is not satisfactory. The other is it will consume huge cost, time and manpower to restart the oil indusrty. However, US had not controll the venezuela but just make a deal, which still have a long way to go to lift economic sanctions.
For my personal, i'd like to see a rich and vibrant venezuela, but I seriously doubt whether the current US government would allow its existence, even though it actually aligns with the long-term interests of the US.（Also benefit to China, you cannot sold your goods to anyone with no money.）
