The US is the world's top oil producer. Why does it want Venezuela’s crude?

The U.S. has announced a major oil agreement that would give it majority operational control over around 65 billion barrels of Venezuelan oil, nearly 20% of Venezuela’s proven reserves.

The Deal: Key Features

• The proposed arrangement would cover 17 Venezuelan oil fields and involve private-sector participation rather than direct taxpayer funding.
• A new private company is proposed, with U.S. interests holding around a 55% operational share.
• U.S. buyers would reportedly be able to purchase Venezuelan crude at cost under the arrangement.
• Venezuela expects the deal to attract nearly $100 billion in private investment and generate substantial long-term tax revenues.
• The legal basis remains uncertain, particularly over whether Venezuela’s interim administration can enter into binding long-term oil agreements.
• Opposition groups have also raised concerns over the extent of foreign control over Venezuela’s strategic oil assets.

Why Does the World’s Largest Oil Producer Want Venezuelan Oil?

1. Technical Reason: Crude Oil Is Not Fully Interchangeable

• Venezuelan crude is predominantly heavy sour crude, meaning it is dense, viscous and contains relatively high sulphur levels.
• U.S. domestic production, especially from shale formations, is largely light sweet crude, which has different refining characteristics.
• Many U.S. Gulf Coast refineries were historically designed to process heavy crude from Venezuela, Mexico and Canada.
• Consequently, the U.S. can simultaneously export light crude while importing heavy crude to keep its refinery system operating efficiently.

2. Geopolitical Reasons

• Greater access to Venezuelan reserves could strengthen U.S. influence over global oil supply and energy markets.
• Additional heavy-crude supplies could help moderate international oil prices during disruptions such as a Strait of Hormuz crisis.
• The deal could reduce dependence on heavy-crude suppliers linked to Iran and Russia, both strategic rivals of the U.S.
• It could also limit growing Chinese and Russian influence in Venezuela’s energy sector.
• The arrangement therefore fits into a broader U.S. effort to reinforce its strategic position in Latin America and the Western Hemisphere.

Venezuela’s Oil Story: From Oil Giant to Production Decline

• Venezuela possesses the world’s largest proven oil reserves, estimated at around 300 billion barrels, but currently contributes less than 1% of global output.
• It was once a major supplier of crude oil to the U.S., particularly before the early 2000s.
• The 2007 nationalisation drive under Hugo Chávez led major foreign companies such as ExxonMobil and ConocoPhillips to exit.
• Long-term underinvestment, corruption, poor maintenance and management failures caused a sharp fall in oil production.
• U.S. sanctions imposed in 2019 virtually stopped Venezuelan crude exports to the American market.
• A limited licence granted to Chevron in 2023 allowed partial restoration of production and exports.
• After U.S. sanctions, China became the principal destination for Venezuelan crude, while Russia also expanded its investment and influence.

Challenges Ahead

• Restoring Venezuelan production to late-1990s levels could require more than $180 billion in investment over around 15 years.
• Much of Venezuela’s oil infrastructure is old, damaged and under-maintained, requiring extensive rehabilitation.
• Legal uncertainty surrounding ownership, contracts and the authority of the current administration could delay implementation.
• Domestic political resistance to foreign operational control over strategic oil assets could become a major obstacle.
• Any revival of output will therefore depend on political stability, sustained investment, regulatory certainty and infrastructure reconstruction.

Significance

• The deal highlights how energy security depends not only on how much oil a country produces, but also on the type of crude its refineries are designed to process.
• It also illustrates the growing overlap between energy economics, sanctions policy and geopolitical competition.
• For the U.S., Venezuelan oil offers both a suitable refinery feedstock and a means to counter Chinese and Russian strategic influence in Latin America.