US Refiners Benefit from Access to Venezuelas Heavy Oil Supplies

US Oil Companies Eye Venezuela’s Crude as Investment Opportunity

The United States’ bid to control Venezuela’s oil sector has drawn attention to the country’s unique crude oil composition. Crude oil, produced by approximately 100 countries, varies in viscosity and sulfur content, affecting its value in different markets. The US refineries are particularly interested in Venezuela’s heavy, sour crude due to its lucrative nature.

Crude oils are classified into two main categories: “heavy” or “light” based on their viscosities, and “sour” or “sweet” based on their sulfur content. Heavy, sour grades are more challenging and costly to refine into petroleum products such as gasoline, diesel, kerosene, and jet fuel. In contrast, lighter and sweeter crude commands higher prices.

Venezuela possesses the world’s largest proven oil reserves, estimated at 303 billion barrels. The majority of these reserves are located in the Orinoco Oil Belt, which is characterized by dense and viscous oil with a tar-like consistency. Industry analysts note that tapping the basin’s true potential will require significant investment due to the degraded state of the sector’s infrastructure and knowledge base.

The Latin American country’s output has declined significantly, from approximately 3.5 million barrels per day in the 1970s to around 860,000 barrels per day in November. Rystad Energy estimates that about $110 billion in capital investment would be needed to return to the country’s late 2000s production level of around 2 million barrels per day.

US President Donald Trump has stated that US oil companies are prepared to invest billions of dollars to revive production. However, some industry analysts have expressed skepticism about the feasibility of investing in Venezuela without significant incentives and guarantees. ExxonMobil and ConocoPhillips, two major US oil firms, pulled out of the country in 2007 following Chavez’s nationalization of the industry.

Chevron, which operates under a special exemption from Washington’s sanctions, is widely viewed as best positioned to profit from Trump’s plans. The company has stated that significant changes are needed in Venezuela for it to be considered an investable opportunity.

Source: Al Jazeera