Rehabbing Venezuela to Produce Oil

FTR, 10 Gulf Coast refineries don't need it upgraded with shuttle tankers with steam heating coils and on dedicated routes. Eagle Ford would gain value as diluent in Venezuela. It's actually condensate and not really crude oil.

LINK

Short-Term Fixes — Up to 18 Months
Improve Venezuelan Upgraders: Because Venezuela’s heavy crude is so thick — its viscosity is more like peanut butter than gasoline — it’s challenging to transport and refine. To flow in pipelines, it must either be blended with a diluent, such as condensate or natural gasoline, or upgraded to a lighter synthetic crude oil (SCO), a process that is capital-intensive and operationally complex. When blending or upgrading capacity is insufficient, production quickly backs up at the wellhead, which has long been a recurring problem in the Orinoco Belt (blue-shaded area in Figure 2 below), where most of the country’s low-API, high-sulfur crude is produced.

All four of the country’s crude upgraders (white pentagons along the coast in Figure 2) appear to be shut down. With no upgrading capacity to handle its heavy crude, Venezuela is limited to export volumes that can be moved as diluent-blended barrels, a major constraint on operations. One of the first orders of business would be to improve these upgraders. We believe basic inspections and even small repairs could make a big difference. Critical inspections, leak and fire repairs (especially at PetroCedeño after a November 2025 fire) and basic mechanical utility repairs should be the first order of business. These repairs could lead to small throughput increases, even at the healthiest upgraders, such as Petropiar. (Larger repairs and upgrades would be long-term projects.)

Get Diluent Back: The U.S. issued a new set of licenses in late January and early February that open a path for U.S. firms to work with Venezuelan oil. On January 29, the Treasury Department issued a new license allowing established U.S. companies to load, transport, store, sell and refine Venezuelan crude. Then, on February 3, it issued another license to establish the legal structure for outside investment in the rehabilitation of Venezuela's oil industry. This means that U.S. companies are now allowed to provide diluent to Venezuela’s oil sector, which had previously been largely prohibited. (Before Treasury issued these licenses, only Chevron could send diluent to Venezuela under U.S. sanctions.) Most of the country’s recent diluent supply had come from Iran, despite restrictions. Gaining access to more diluent could have an immediate impact, allowing pipelines to resume operations and exports to ramp up.

Basic Repairs on Wells: A big chunk of Venezuela’s “shut-in” production isn’t stuck because of the rock. It’s because the wells are literally broken. We’re talking basic stuff that nearly any oil crew could tackle, such as corroded tubing, wellbores plugged with waxy paraffin and perforations packed with sand. For years, Venezuela’s state-owned Petróleos de Venezuela S.A. (PDVSA) didn’t have the parts, people or budget to stay ahead of these projects, so many wells were taken offline and left that way. The quickest way to get these barrels back is through these small improvements. That means replacing worn-out submersible pumps, and scraping and washing out paraffin and sand. These small, low-tech projects could make a big difference.

Oilfield Service Companies: Bringing back big oilfield service companies, such as Halliburton and Baker Hughes, to handle chemical injection, pressure maintenance and reservoir monitoring is critical to any real revival in Venezuela. On paper, it sounds simple. But in the real world, there could be several months of red tape with licenses, sanctions, waivers, negotiations and other logistics. Halliburton withdrew its staff in 2020, but on the company’s January 21 conference call, CEO Jeff Miller said Halliburton can “mobilize in weeks” and “move fairly quickly as opportunities arise.” Miller said the company would need to resolve any commercial and legal issues, including “payment certainty.” A firm like Halliburton is crucial because it essentially keeps wells healthy with chemical injections, pressure maintenance and reservoir monitoring — much of which isn’t happening today.

Minor Infrastructure Repairs: This is different than what the oilfield service companies do and what happens at the wellbore. This includes fixing pumps at tank farms, repairing loading arms at ports, patching small pipeline leaks and restoring electricity at the field level. Right now, Venezuela sometimes shuts in wells simply because a storage-tank valve is broken or a power substation failed. Cleaning up these nagging issues is another item that could bring shut-in barrels back online.