Could Venezuela Production Get Back to 3MM Barrels Per Day?

Could Venezuelan oil production get back to three million barrels per day?

The answer to that question is yes, according to a special Rystad Energy market update penned by three Rystad analysts – Artem Abramov, Head of Oil and Gas Research, Aditya Ravi, SVP, Oil and Gas Research, and Radhika Bansal, VP, Oil and Gas Research – which was sent to Rigzone this week.

“There is a realistic technical pathway towards [a] three million barrel per day supply level,” the analysts said in the update.

“Based on our assessment and expected project timelines, it could take around 15 years to get back to three million barrels per day, so production can return to [the] late 1990s levels by 2040 if the new investment cycle starts as early as 2026,” they added.

The analysts stated in the update that they estimate that up to 300,000-350,000 barrels per day can be restored within less than three years but added that more significant investment with longer lead times is needed to grow beyond 1.4 million barrels per day.

“In our back to three million barrels per day scenario, Venezuela reaches output of two million barrels per day in 2032 and three million barrels per day in 2040,” they said.

“Using our project-level cost data from the UCube database, sequencing investment decisions by project economics and simplicity of execution, and including estimated midstream, upgrader, and other non-upstream facility spending, we conclude that the amount of capital needed for the back to three million barrels per day scenario is enormous,” they warned.

The analysts noted in the update that Rystad Energy believes that around $53 billion of oil and gas upstream and infrastructure investment is needed over the next 15 years just to keep Venezuela’s crude oil production flat at 1.1 million barrels per day.

They went on to state in the update that “there is an opportunity to bring production back to 1.4 million barrels per day in less than 24 months through a combination of workovers, infrastructure repair, and selected short-cycle upstream investment” but said the total capex to unlock this rebound is estimated at $14 billion, “with some additional incremental operational expenditure spending needed”.

Exceeding 1.4 million barrels per day “will be significantly more challenging and can be split into two phases”, the analysts warned.

“We estimate that an additional $41 billion investment is needed to bring crude oil production from 1.4 million to two million barrels per day in the early 2030s and maintain it at that level until 2040,” they said.

“Going beyond two million barrels per day in the 2030s will be even more challenging. We estimate that a staggering $75 billion in additional investments is needed to bring production from two million barrels per day in the early 2030s to three million barrels per day in 2040,” they added.

The analysts went on to warn in the update that “there is an additional layer of complexity”, as they estimate that “with current technologies and service cost levels, around 60 percent of this investment, or $44 billion, is associated with projects requiring stable market conditions with oil prices above $80 per barrel”.

The Rystad analysts highlighted in the update that, “with the current global crude market fundamentals, resilient U.S. shale, ample spare OPEC capacity, and robust growth from Guyana and other regions, there is very little room for two million barrels per day of additional capacity from Venezuela until the second half of the 2030s”.

“A more realistic 15-year ceiling for Venezuela oil supply probably lies in the 2-2.5 million barrel per day range, but potential remains for a longer-term three million barrel per day recovery,” they said.

“Moreover, there is a possibility that the general learning curve and access to modern technology might reduce breakeven prices of these high-cost opportunities in future,” they added.

Summing up, the Rystad analysts noted in the update that $183 billion of oil and gas investment is needed over a 15-year period, or $12 billion per year, to bring Venezuela’s crude oil production back to three million barrels per day by 2040.

“$183 billion is roughly equivalent to one year of North America land upstream oil and gas capex at the current run-rate,” they pointed out.

“The total required capex can be broken into $102 billion of upstream spending and $81 billion for pipelines, upgraders, and other infrastructure,” they added.

“Even if we assume that PDVSA and the national budget can finance maintenance spending of $53 billion, the two million barrel per day growth target would still require some $130 billion, or $8-9 billion per year, of additional investment,” they continued.

“In order to make the scenario a possibility, at least 25 percent of this amount, or around $30-35 billion, would have to be committed in the first two years of the 15-year cycle,” they went on to state.

In a BMI report sent to Rigzone by the Fitch Group this week, analysts at BMI, a unit of Fitch Solutions, said they estimate that “to boost oil production to levels of more than three decades ago, where production averaged over 3.5 million barrels per day, this could require capital expenditure levels up to $100 billion”.

“Given the core view [of our Country Risk team] of regime continuity, which likely means the continued involvement of PDVSA as a majority stakeholder in licensing, the weaker oil price environment (Brent forecast at $67 per barrel in 2026), and uncertainty over the extent of U.S. involvement in Venezuelan governance, we view this scenario as unrealistic in the near term,” they added.

“To boost production by over double current output levels, this would require multi-year commitments by the oil majors, with timelines likely to stretch to 5-7 years before they result in production,” the BMI analysts continued.

Rigzone has contacted the Venezuelan embassy in the UK, the White House, and the American Petroleum Institute for comment on the Rystad update and BMI report. At the time of writing, none of the above have responded to Rigzone.

In a news conference held on January 3 in Mar-a-Lago, Florida, which was streamed by Sky News, U.S. President Donald Trump stated, “late last night and early today, at my direction, the United States Armed Forces conducted an extraordinary military operation in the capital of Venezuela”.

To contact the author, email andreas.exarheas@rigzone.com