Energy executives cite power cuts, sanctions, and small contractor pool as obstacles
Ten months after the ouster of Nicolás Maduro, Venezuela’s national oil production has hovered just above one million barrels a day since January, up from 500,000 a day in 2020 after U.S. sanctions began to bite but far below the more than 3.2 million barrels a day produced in the late 1990s. The decaying industry reflects two decades of mismanagement under late President Hugo Chávez and his successor Nicolás Maduro, whom the U.S. captured in a raid in January and is prosecuting in New York on drug-trafficking charges, which Maduro denies.
Industry executives and analysts said reviving the sector will require hundreds of billions of dollars and years of work, with challenges including power cuts, a small pool of experienced contractors, and the difficulty of securing project financing while U.S. sanctions remain in place.
U.S. officials say change is on the horizon. At a three-day conference of foreign investors at the JW Marriott hotel in Caracas — a venue favored by U.S. diplomats — last week, Michael Garcia, deputy chief of mission at the U.S. Embassy, pointed to recent deals involving Chevron and power-equipment firm GE Vernova as evidence that an alliance with Acting President Delcy Rodríguez, Maduro’s former deputy, was reviving the oil sector and shoring up the national electrical grid. “Real work remains,” Garcia said. “But the direction is unmistakable. Where there was stagnation, there is now investment.”
The conference brought more than 650 executives from international energy companies to a country sitting on some of the world’s largest oil and gas reserves. “Venezuela has more crown jewels than the Tower of London,” said Hunter Hunt, chief executive of Texas wildcatter Hunt Energy. Panelists were asked to keep discussions technical and apolitical, leaving Venezuela’s political future unaddressed.
Polls show growing discontent with Rodríguez’s unelected interim administration, a potential obstacle to long-term investment. Small protests have broken out nationwide in recent weeks, with demonstrators blocking roads to demand elections and expressing frustration with their quality of life. Maduro was captured in a U.S. raid in January and is being prosecuted in New York on drug-trafficking charges, which Maduro denies.
On the operational side, executives listed the challenges to ramping up output: power cuts, a small pool of experienced contractors, and the difficulty of securing project financing while navigating a web of U.S. sanctions. William Antonio, managing director for Mexico, Central America and Venezuela at SLB, a global energy-services firm formerly known as Schlumberger, said only a third of the country’s 30,000 wells is active after almost eight years of international blacklisting that kept new technologies from entering. César Álvarez, deputy regional director for French firm Maurel & Prom, said his company aims to double its output this year to 22,000 barrels a day. “The learning curve has been difficult,” Álvarez said. “We drew up an action plan, but we ran up against reality and had to delay some activities.”
U.S. and Venezuelan officials are pressing foreign companies to further develop offshore gas deposits and the fields in eastern Venezuela, which contain heavy, tar-like oil. But the areas offering the fastest recovery are in the west around Lake Maracaibo, a Connecticut-sized patch of territory where some of the country’s oldest installations are located. Executives hope old brownfields — as mature fields are called — can be quickly rejuvenated.
North American Blue Energy Partners acquired 17 oil blocs in a joint venture with the Pentagon, several of them in western Venezuela around Lake Maracaibo. California-based Pacific Coast Energy Co., among the newcomers to Venezuela’s energy patch, said this week it has started a program to reactivate 900 wells in Cabimas, the once-booming city on the lake’s shore.
In Cabimas — ground zero for the U.S. effort to resurrect the sector — and surrounding towns, the remnants of Venezuela’s oil boom are woven into everyday life. An oil gusher discovered more than 100 years ago gave birth to Venezuela’s energy industry near this once-booming city of 350,000 on the shores of Lake Maracaibo. Today, the city resembles an oil-industry graveyard. Mangled drill towers and collapsing offshore platforms are visible as far as the eye can see; hardened globs of crude cling to fishing nets pulled from the lake; natural gas gurgles up from busted underwater pipelines. Children play baseball between leaky pump jacks that often stop working because of power outages that last up to 12 hours a day.
José Medina, a fisherman with five children, told reporters he is waiting for American investors to arrive. “God willing, the foreigners will come back soon and we’ll have a better quality of life,” Medina said. But he was worried it will take a long time. “It feels like we’re neither moving forward nor backward.”
Lucila Nava, a retired secretary whose father had worked for 40 years at Shell, said she was frustrated that the U.S. supported Rodríguez and kept Maduro’s authoritarian government intact as foreign companies secured lucrative contracts. “We liked [President] Trump when he took out Maduro,” Nava said. “But you can’t just take away oil like this. We get it, the U.S. is the biggest power in the world. But that doesn’t give you the right to do something like this.”
Jorge Giordani, a Marxist and former chief economic planner in Venezuela’s government, told a gathering of leftist activists in Caracas that capitalists are trying to steal “the devil’s excrement,” the enormous oil wealth long seen as a blessing and curse in the country. “They’re back,” the 86-year-old said. “And they’re only interested in one thing: our hydrocarbons.”
Housing developments were built around crude-processing facilities in an architectural style reminiscent of 1960s American suburbs — a throwback to the era when U.S. energy companies were instrumental in building the oil economy, when oil workers enjoyed company housing, neighborhoods with swimming pools and golf courses, and a lake with clean water and healthy marine life. In the El Milagro neighborhood of the town of Lagunillas, elderly residents who had grown up during the country’s economic heyday now struggle with daily power outages and a scant water supply. Aracelis Urdaneta, who grew up there during the oil boom, said residents have stopped complaining. “We have no services and no one complains or does anything about it, because everyone just got used to this crap,” Urdaneta said.
People try to be resourceful with what is left of the oil industry. In Cabimas, a group of neighbors tap a pump jack for natural gas and pipe it into their kitchens. At times, oil seeps through the rudimentary pipework, sending the black goo into the kitchen.
Security guard Elmo Quintero said he had hoped that after Maduro’s overthrow, his three children in Colombia could return home and the decrepit health system would improve. A diabetic, the 65-year-old said he can’t afford insulin and the local clinic rarely has syringes. He self-medicates with a concoction of herbal tea. Quintero helps maintain a rusted pump jack for the state oil company, Petróleos de Venezuela, on a patio adjacent to his brick shack. His chickens feed between pipelines. Water service is available for a couple of days every three months. As he spoke, the pump jack ground to a halt behind him — another power failure. He was doubtful he would see an improvement in his lifetime. “I’m thinking more about my grandchildren,” Quintero said.