Venezuela’s oil industry is in shambles after decades of socialism

President Trump has made clear he wants to revitalize Venezuela’s oil industry so he can use the cash to make the country great again — but the sector is in shambles after decades of plunder, talent flight and negligence as a result of socialist rule.

After capturing Venezuelan dictator Nicolas Maduro over the weekend, Trump vowed that US companies would soon tap into the nation’s rich oil reserves, which Caracas says hold about 303 billion barrels worth of petrol, roughly 17% of the world’s supply.

Production has plummeted since hitting a high in 1997 — and the country produced just 900,000 barrels of oil per day in 2024, about 6% of what the US puts out.

Additionally, the oil companies’ holdings were nationalized and seized twice — once in 1976 and again by Maduro’s predecessor Hugo Chavez in 2007.

Chevron remains the only US oil company allowed to operate in Venezuela. Observers say many oil executives are worried about returning to the country and invest the tens of billions needed to ramp up production — given the history of instability, violence and government seizures.

Production plummets under socialism

Venezuela formally nationalized its oil industry in 1976 under then-President Carlos Andes Perez, seizing hundreds of private and foreign-owned assets, including projects run by ExxonMobil.

Exxon, Chevron and Shell were hit hard by the Perez bid for nationalism, with the companies — which accounted for more than 70% of Venezuela’s crude oil production — losing an estimated $5 billion in assets, according to reports at the time.

Perez’s move came at a time when oil production was plummeting in the country, putting out fewer than 2 million barrels per day until the 90s — when Venezuela reopened to foreign investors.

By 1997, Venezuela’s oil production peaked to 3.5 million barrels, but a massive decline followed a decade later when then-President Hugo Chavez nationalized the industry again.

After Maduro took over in 2013 and Venezuela was hit with harsh sanctions from the US, production plummeted, with the next ten years seeing a 300% decrease.

Venezuelan oil plants crumble

The Venezuelan national oil company, known as PDVSA, has been criticized for the failing petrol production, with the company lacking the necessary money and expertise to increase output, according to the London-based Energy Aspects research firm.

Venezuela’s oil fields are effectively run down and plagued by “years of insufficient drilling, dilapidated infrastructure, frequent power cuts and equipment theft,” the research firm said.

Restoring Venezuela’s oil industry would require an enormous investment, with Energy Aspects estimating that just adding 500,000 barrels a day of production would take two years and cost about $10 billion.

Even with that addition, Venezuela wouldn’t crack the top 10 largest producers in the world — despite the enormous stores wealth.

Oil companies nervous about what comes next

It remains to be seen if US energy companies will invest in Venezuela despite the promise of access to the country’s massive reserves.

Houston-based ConocoPhillips, which was forced to pull out of Venezuela in 2007 after Chavez seized its assets, said it was too early to tell if it would be worth investing in a return to Caracas.

“ConocoPhillips is monitoring developments in Venezuela and their potential implications for global energy supply and stability. It would be premature to speculate on any future business activities or investments,” the company said in a statement.

ConocoPhillips and Exxon had sued Venezuela for a combined $32 billion over the 2007 seizure, with the companies only awarded a fraction of their losses.

Any company that wishes to open up in Venezuela would also have to contend with Chevron, the last remaining American oil corporation in the country, which still produces more than a third of the oil there.

It would take a considerable investment for companies to try to duplicate Chevron’s success, especially since the crude oil in Venezuela is thicker than what’s produced on the global market, said Michael Klare, a senior visiting fellow at the American Arms Association.

“You just can’t walk into Venezuela and pump oil,” he told CNN. It’s an exceedingly difficult and complex process that Chevron has, over the years, excelled at, but very few companies have that technology at hand.”

José Ignacio Hernández, a consultant and public-debt expert at Aurora Macro Strategies, noted that Caracas is still in disarray, which would detract any company from rushing to invest.

“Oil companies always want oil, and Venezuela has a lot of it, but they need political stability, which requires more than just removing Maduro,” he told the Wall Street Journal. “The situation is still ongoing.”

Trump has called for oil companies to pour billions into the country to help bring the country’s production up to modern standard.

A few smaller players appear eager to take the risk.

Ali Moshiri, a former Latin America head for Chevron, said he’s assembled investors ready to invest $2 billion into the country — and they’ve already identified potential sites.

“I’ve had a dozen calls over the past 24 hours from potential investors. Interest in Venezuela has gone from zero to 99%,” he told the Financial Times.