Venezuelan Oil: A Low-Quality, High-Cost Resource

Venezuela possesses the world's largest proven oil reserves, with approximately 303 billion barrels, primarily in the Orinoco Oil Belt. However, this immense natural wealth presents serious challenges due to the low quality of its crude oil and the high costs associated with its extraction and processing. Unlike the light, sweet crude oils of other countries, Venezuelan oil is heavy, viscous, and has a high sulfur content, making it less attractive in the global market and more expensive to produce.

The Low Quality of Venezuelan Crude Oil

Venezuelan oil, especially that from the Orinoco Belt, is classified as extra heavy or heavy. Its API gravity is very low: for example, the base crude from the Belt has less than 10° API, while the most common exportable blend, Merey 16, is around 16° API (with typical values ​​between 15.9 and 16.2°). For comparison, Brent crude (the international benchmark) has an API gravity of around 38°, and West Texas Intermediate (WTI) is even lighter.

Furthermore, it is sour crude, with a high sulfur content: between 2.5% and 3.4% in Merey, reaching over 5% in some grades of Orinoco. This makes it corrosive to equipment and pipelines, and generates more pollutants during refining.

These characteristics mean that:

• It does not flow easily: it is thick like molasses, requiring diluents (naphtha or light crudes) to transport it through pipelines or load it onto tankers.

• It produces fewer valuable products: when distilled, it generates a higher proportion of heavy residues that must be intensively processed (with coking and hydrodesulfurization units) to obtain gasoline, diesel, and jet fuel.

• It requires complex refineries: only specialized facilities, such as many on the US Gulf Coast, in China, or in India, can process it efficiently.

As a result, Merey is sold at significant discounts to Brent: in recent periods, between $13 and $22 per barrel less, depending on sanctions and global supply. This drastically reduces export revenues.

High Extraction Costs

Extracting Venezuelan oil is remarkably expensive compared to other producers. Orinoco's extra-heavy crude is not extracted conventionally; it requires advanced techniques such as:

• Steam injection (steam-assisted gravity drainage or similar).

• Horizontal wells with submersible pumps.

• Constant dilution to make it fluid.

These methods increase operating costs. Estimates indicate that the breakeven point for projects in Venezuela is around $40-80 per barrel, much higher than in US shale (around $35-50) or Saudi Arabia (less than $20-30).

Furthermore:

• PDVSA's infrastructure is deteriorated by decades of underinvestment, corruption, and sanctions: outdated pipelines, lack of maintenance, and a shortage of diluents.

• Recovering production to historical levels (3-3.5 million barrels per day) would require massive investments: between $100 and $183 billion over the next decade, according to analysts such as Rystad Energy.

• Currently, production is around 1 million barrels per day (data from the end of 2025), less than 1% of global supply, despite enormous reserves.

Compared to countries like Saudi Arabia or the US, where light crude flows more easily and cost-effectively, Venezuelan oil requires more capital and technology, making it vulnerable to low oil prices.

Economic Consequences and Outlook

The combination of low quality and high costs has contributed to the collapse of Venezuela’s oil industry, which once accounted for 95% of exports. Despite its reserves, Venezuela produces only a fraction of its potential, and its crude is sold at discounts that erode revenues.

Although recent political changes could attract foreign investment (such as from Chevron or Chinese companies), experts warn that any significant recovery would take years or decades. Venezuelan oil remains a “cursed wealth”: abundant underground, but difficult and expensive to convert into prosperity.

In short, poor quality and high extraction costs explain why Venezuela, with the world’s largest reserves, does not dominate the global oil market as might be expected.

Disclaimer:

The information provided through this channel does not constitute financial advice and should not be construed as such. This content is for purely informational and educational purposes. Financial decisions should be based on a careful evaluation of your own circumstances and consultation with qualified financial professionals. The accuracy, completeness or timeliness of the information provided is not guaranteed, and any reliance on it is at your own risk. Additionally, financial markets are inherently volatile and can change rapidly. It is recommended that you conduct thorough research and seek professional advice before making significant financial decisions. We are not responsible for any loss, damage or consequences that may arise directly or indirectly from the use of this information.