From Canada to China, Maduro’s fall is transforming the global oil market
Reverberations from the most consequential U.S. intervention since the 1989 invasion of Panama — the stunning Jan. 3 capture and removal of Venezuelan President Nicolas Maduro — are reshaping energy calculations around the globe, including pipeline politics in Canada and investment strategies in China, The Washington Times writes.
Countries such as China that had significant investments in Venezuela are waiting to see the next move from the Trump administration and the U.S. oil companies that the president has called on to revamp the ailing Venezuelan oil industry.
By some estimates, China has spent at least $100 billion in Venezuela since the country nationalized its oil industry under socialist leader Hugo Chavez in 2007 and is owed as much as $20 billion by Venezuela. Beijing is unlikely to be compensated for that debt, with the White House calling the shots for Caracas.
Two Chinese companies, China National Petroleum Corp. and Sinopec, have invested heavily in Venezuela’s oil industry. The day before his capture, Mr. Maduro met with a delegation of Chinese diplomats. The raid, in effect, has thrown a Trump-approved wrench into the gears of China’s Belt and Road Initiative projects not just in Venezuela but across South America as well.
“Venezuela has been a money pit for China,” said Tim Samples, a professor at the University of Georgia and a Latin American energy expert, “and to a lesser extent for Russia as well.”
Neither China nor the United States could resist the lure of Venezuela’s untapped resources.
The U.S. Energy Information Administration says Venezuela sits atop 303 billion barrels, or roughly 17% of global reserves. However, Venezuela’s heavy oil is a tarlike substance and expensive to produce.
“It will take two to three years of steady investment, say $80 billion, and we might be able to produce 1.6 million per day,” said Jose Chalhoub, a former analyst for Petroleos de Venezuela S.A., Venezuela’s state-owned oil and gas company.
“Currently, you need to spend $35 to $40 to produce a barrel in the Orinoco Belt,” Mr. Chalhoub said.
Those dynamics favor Western Canada, at least for now, as U.S. refiners continue to rely on stable pipeline supplies from the north. The threat of tariffs on imports from Canada or other incentives could make Venezuelan oil more attractive to U.S. refiners in the future. National polls show a solid majority of Canadians want to build a new oil pipeline to the Pacific coast.
With a new geopolitical reality in the region, Shell may reconsider plans to develop the Dragon gas field on the maritime border between Venezuela and Trinidad and Tobago. The British-based energy company shelved earlier plans for fear of provoking Venezuela.
