Even as oil prices gyrated and a cloud of uncertainty looms over the market, the potential for rapid increase in Venezuelan oil production remained a distant dream.
Experts and analysts believe that Venezuela would need a considerable amount of investments to even prop up oil production in the country to above 1.5 million barrels per day (bpd).
Oil prices reacted mildly to the news of US President Donald Trump’s removal of Venezuelan leader Maduro over the weekend.
Both Brent and West Texas Intermediate experienced initial drops, with Brent briefly dipping below $60 per barrel.
However, prices reversed course as trading progressed, with Brent recovering to above $62 a barrel at the time of writing.
Why ramping up oil production may not be easy
The shifting political landscape in Venezuela, an OPEC nation with the world’s largest proven oil reserves, carries complex and time-dependent implications for global oil supplies, according to Commerzbank AG.
These effects are not uniform, varying in their immediate versus long-term impact, and can even operate in opposing directions.
Under Rystad Energy’s base case scenario from December 2025, which anticipates ongoing sanctions and blockade, Venezuela’s crude oil output is projected to see a gradual drop.
Production is expected to fall from its current level of 1.1 million bpd to 700,000 bpd by the year 2040, according to the Norway-based energy intelligence company.
Rystad Energy’s base case call remains for the time being.
However, the agency could consider an alternative scenario where international oil companies gain complete assurance in a stable investment environment and receive appropriate incentives to commit capital to Venezuela’s oil sector.
“Based on our assessment and expected project timelines, it could take around 15 years to get back to 3 million bpd, so production can return to late 1990s levels by 2040 if the new investment cycle starts as early as 2026,” Rystad Energy analysts said in their latest research.
We estimate that up to 300,000-350,000 bpd can be restored within less than three years, but more significant investment with longer lead times is needed to grow beyond 1.4 million bpd.
Hefty capex required
The agency said that it would be possible to scale up production back to 1.4 million bpd in less than 24 months, but that would take a total capital expenditure of $14 billion.
Bringing Venezuela’s crude oil production back to 3 million bpd by 2040 would require a total oil and gas investment of $183 billion over 15 years, equating to an annual investment of $12 billion, Rystad analysts further said.
This $183 billion total is comparable to the current annual upstream oil and gas capital expenditure for North American land operations.
The overall required capital expenditure is split between $102 billion for upstream spending and $81 billion dedicated to infrastructure, which includes pipelines and upgraders, the analysts added.
We note that the latter exceeds PDVSA’s own estimate of $58 billion from 2019, mainly due to changes in the USD value between 2019 and 2025, our expectation of additional repair needs emerging towards the second half of the forecast period, and typical capex overruns.
Even accounting for the possibility of PDVSA and the national budget covering the $53 billion in maintenance spending, achieving the 2 million bpd growth goal would still necessitate an additional investment of approximately $130 billion, which translates to about $8–9 billion annually, the analysts said.
According to the research, for the scenario to play out, a minimum of 25% of the total sum, approximately $30-35 billion, would need to be invested within the first two years of the 15-year period.
This level of funding could only be secured from international oil companies.
These companies will only consider investing in Venezuela if they are completely assured of the nation’s system stability and its attractiveness as an investment climate for global oil and gas players, Rystad said.
“For production capacities to expand again, Western oil companies would need to invest in Venezuela’s ailing oil infrastructure,” Carsten Fritsch, commodity analyst at Commerzbank, said.
To do so, they require sufficient investment security. Only when they can be sure that the country is politically stable and that their investments will pay off in the long term will they invest in exploiting the world’s largest oil reserves.
Political uncertainty weighs on outlook
The immediate future is expected to be highly volatile. The key question is whether the Maduro regime’s established authority will peacefully concede defeat or opt to resist its removal.
Should the latter occur, President Donald Trump has indicated the possibility of further action.
Trump has not yet lifted the oil export blockade on Venezuela, which has been active since December.
Preliminary data, based on tanker movements, suggests that Venezuela’s oil exports in December almost halved to 500,000 bpd, according to Commerzbank.
“It is therefore to be expected that oil supplies from Venezuela will be lower in the short term, which per se argues for higher oil prices,” Carsten Fritsch, commodity analyst at Commerzbank, said.
This is offset by the prospect of a slight increase in Venezuelan oil production in the coming months if Trump lifts the blockade on oil exports and eases sanctions.
Significant expansion not possible
Venezuela’s oil production capacity, currently estimated by the International Energy Agency at only 1 million bpd—just slightly above current output—precludes any significant production expansion in the near future.
This sharp decline from almost 2.5 million barrels per day a decade ago is attributed to the Maduro regime’s mismanagement and Western sanctions, which have starved the necessary investment in oil infrastructure.
Despite US sanctions, production has doubled from its 2020 low, primarily due to purchases by China.
Furthermore, the US government has permitted an American company to produce and export limited volumes of oil from Venezuela.
Higher oil prices are also needed to expand crude oil production in Venezuela.
“Whether this is the case at the current price is questionable,” Fritsch said.
This is because oil from Venezuela is likely to be traded at a considerable discount to the WTI benchmark due to its higher density and high sulfur content.
Given the oil market’s existing surplus, an influx of Venezuelan oil would intensify downward pressure on prices, a factor companies would need to incorporate into their decision-making.
Additionally, the existing decline in Venezuela’s oil production, preceding the regime change, suggests that a V-shaped recovery in output is unlikely.
“However, even in an optimistic scenario, a rapid return to a production level of more than 2 million barrels per day is unrealistic…,” Fritsch said.
In our view, there is thus no reason to fear that the oil market could soon be flooded with Venezuelan oil.
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