Can Venezuela produce 3 million barrels of crude oil a day?

There is a long road ahead to restoring Venezuela’s crude oil production to its former levels.

Following the capture of Venezuela President Nicolás Maduro and his indictment in the U.S., attention has shifted to the potential for a U.S.-led effort to bring oil majors back to a politically unstable country, which nationalized many of their assets in 2007, and revive crude output that has fallen significantly in recent decades.

Venezuela currently produces an average of 800,000 barrels of crude oil per day, well below its peak of 3.5 million barrels per day, or bpd, in the 1990s. Oil production declined sharply following the 2007 expropriation of U.S. oil major assets. Production fell further during the global oil crash of 2014-2016, when crude prices fell by as much as 70%. Even as oil prices stabilized in the latter half of that decade, Venezuelan production did not recover, and its production took a further hit from the pandemic-triggered oil price decline in 2020.

In the past few years, Venezuela’s oil production has recovered slightly, but more important to the global market is its oil reserves. According to research firm Wood Mackenzie, Venezuela has at least 241 billion barrels of recoverable crude oil. Analysts at Bernstein say that figure may be as high as 300 billion barrels of proven reserves, among the largest in the world. “Venezuela has the potential to be an oil superpower,” according to a recent note from Bernstein.

But Wall Street remains skeptical that those reserves can be turned into production upside anytime soon.

Bernstein noted in its research that the subsurface reserves are not the issue, and never have been. It is the “above-surface constraints” that pose the biggest issues for Venezuela. “Since the 2006/07 nationalization of western oil company interests by Hugo Chavez, lack of investment, mismanagement, neglect, have driven an oil production decline of 70% to just 1% of current global output,” it noted.

U.S. oil majors are also skeptical, for good reason. With oil trading around the $60 level — though a new geopolitical spark sent the price higher on Wednesday after President Donald Trump warned Iran that a “massive Armada” was heading in its direction and that time is running out to make a deal on its nuclear program — Western oil companies remain focused on capital discipline and efficient use of cash flow after being burned during the oil price crash of the last decade and punished by investors for overproduction and high exploration budgets. Add to that the specific risk of being “twice bitten by Venezuelan nationalization,” according to Bernstein, and it is a reason to remain “exceptionally cautious about committing fresh capital quickly.”

At a recent White House meeting with oil company CEOs, after Trump said U.S. oil companies would spend $100 billion on Venezuelan oil production,