Coincidence or intention? On January 3, 1989, Manuel Andrés Noriega left the Vatican nunciature in Panama and surrendered to the United States Armed Forces, who had invaded the country thirteen days earlier, to be tried in the United States for drug trafficking.
Despite these similarities, the differences are substantial. The most obvious is that Venezuela has the most oil reserves in the world, with almost as much oil as Iran and Iraq combined. But this leads to a paradox. Venezuela produces less oil than New Mexico in the United States, and only about 100,000 barrels per day more than the United Kingdom, a country that announced five weeks ago that it will no longer grant licenses for oil exploitation as part of its political goal of "zero emissions."
So, the removal of Nicolás Maduro is a combination of paradoxes. It affects the country with the most oil in the world. But it is a country that, because it has not invested in its oil industry, produces barely a quarter of what it did in 1997 when Venezuela reached its record of 3.7 million barrels per day. And it comes at a time when there is an oversupply of oil in the world. The United States - the largest producer - Canada, Brazil, Guyana - which Maduro threatened to invade to take its oil - China, and Argentina - with the Vaca Muerta field, expropriated from Repsol in 2012 - are injecting barrels into the market. And, moreover, these countries are not subject to the OPEC+ quota system, the cartel that groups several of the world's largest producers.
Trump announced yesterday million-dollar investments from American companies to restore luster to the country's economy. He referred to this several times in his speech following Maduro's arrest. But major international private oil companies have shown little interest in Venezuela so far, as reported by The Wall Street Journal last month, despite Trump's team's surveys on the possibilities of investing in the country.
The reason is simple: the oil price is low. And Venezuelan crude is comparatively expensive to extract and also has a high sulfur content, requiring much more complex and expensive refining. This has led Trump himself to describe it as "almost asphalt." In fact, 90% of Venezuela's oil is in the so-called Orinoco Belt. It is a crude similar to the oil sands of Alberta, Canada, which produce two million barrels of crude oil daily.
The extraction and refining costs are monumental. Extracting a barrel from the ground can cost $30 - ten times more than in Saudi Arabia - and building a processing plant to convert that oil into normal crude costs between 20,000 and 30,000 million. Venezuela does not have any of these facilities. Building one takes years, requires legal guarantees, skilled labor, and good communications. At this moment, the country lacks all of that. Moreover, oil sands produce fantastic amounts of CO2 when extracted and processed, which foreshadows a significant environmental image problem.
It would be easier to recover existing wells and facilities. But even so, the numbers are staggering. According to the oilfield services consulting firm, just getting Venezuela to produce 1.5 million barrels per day would cost between 20,000 and 30,000 million, not including the maintenance of the crumbling network of pipelines and gas pipelines, which, according to the same company, needs another 20,000 million. According to Wood Mackenzie, increasing Venezuela's production to three million barrels - still below the 1997 record of 3.7 million - would cost between 85,000 and 130,000 million (73,000 to 115,000 million euros) over ten years.
Although estimates of oversupply are always very unstable and depend on variables as unpredictable as how cold the winter is, it seems that supply and demand will not balance until at least 2027. Moreover, if the two largest oil consumers - China and the US - were to stop accumulating in their strategic reserves, the barrel, which is around $60, would fall even further.
Maduro was arrested just a day before OPEC+ holds a virtual summit to review the November decision to cut production. The disappearance of Venezuelan oil could lead them to change that policy. But, more than anything, to help China, which benefits the most from Venezuelan oil (with the exception of Cuba, but that country is not important to OPEC+). In any case, the global oil market has gone through sanctions on Russia, bombings by Israel and the US on Iran, and clashes between Saudi Arabia and the Emirates without flinching. So Venezuela should not be a shock.
The key is that the Caracas regime has killed the goose that laid the golden eggs and produces very little oil. According to the commodity data analysis company Kpler, Venezuela exported between 750,000 and 775,000 barrels of oil in October and November. Of that amount, about 50,000 barrels went to the United States, as part of a system devised by the Trump administration, whereby the Texan oil company Chevron is compensated for the debts incurred by the Venezuelan government. The system, established in March, eliminates any possibility of the Maduro regime receiving a dollar for the oil, which Chevron - the third-largest private oil company in the world by revenue - refines and then sells to other American companies. Around half a dozen foreign companies operate in the energy sector in Venezuela, including Repsol, whose current activity focuses on the country's internal gas market, so it has not been affected by the US blockade.
Aside from the US, Venezuela gives - or rather, gave, because it does not seem that Trump will tolerate the continuation of this operation - around 30,000 barrels per day to Venezuela. That represents about 30% of Cuba's oil consumption. Without Caracas' help, the communist regime in Havana is at serious risk of economic collapse, unless Mexico or Russia increase the transfers they already provide, something that, given Trump's stance, seems unlikely. A marginal amount, less than 5,000 barrels, including refined products, goes to other Venezuelan allies in Latin America.
The rest of Venezuelan oil exports go mostly to China, often at a discount. So it is about 500,000-600,000 barrels in a market where between 40 and 50 million barrels are traded daily. Venezuela's presence is too modest for a possible interruption of exports to be a problem. It is another matter, obviously, whether the United States will allow the oil to go to China.
Beijing's purchases of oil from Caracas are part of China's strategy to build up enormous oil reserves. No one knows the reason for this policy, although the most obvious explanation would be that China is stockpiling oil in preparation for a future invasion of Taiwan, where the US would block tankers in the Strait of Malacca, through which more than half of the world's oil and 80% of what the world's second-largest economy consumes passes.
Beijing buys between 900,000 and one million barrels of oil more than it needs every day. So if it were to stop getting Venezuelan oil, it would not suffer. Probably. It could buy it from Russia, at an even greater discount. This means that there is room in the global oil market. Venezuela is not relevant. It has been 29 years since Caracas pumped 3.7 million barrels per day. And returning to that figure (which was also a blatant violation of OPEC rules) will take at least a decade.