The US says it will gain majority control over more than 65 billion barrels of Venezuelan oil, equivalent to about 20% of Venezuela’s proven reserves, under a proposed agreement.
US President Donald Trump described it as the “biggest oil deal in world history”, involving private companies without direct cost to US taxpayers.
Venezuela has the world’s largest proven oil reserves (~300 billion barrels) but currently produces only around 1% of global crude consumption.
The proposed arrangement seeks to combine US capital and technology with Venezuela’s huge but dilapidated oil infrastructure.
Why Does the US Want Venezuelan Oil?
1. Venezuela’s Heavy Sour Crude
Most Venezuelan crude is “heavy sour”: heavy because it is dense and viscous, and sour because of its high sulphur content.
US crude production is dominated by light sweet crude, which has lower density and sulphur content.
US Gulf Coast refineries were specifically designed to process heavy crude from Latin America and Canada.
Hence, the US can simultaneously export its light sweet crude while importing Venezuelan heavy crude suited to its refinery configuration.
2. Energy Security and Market Influence
Greater access to Venezuelan crude could strengthen US energy security and oil-market influence.
Additional supply could help moderate international oil prices, particularly during disruptions such as the Strait of Hormuz crisis.
Control over Venezuelan production could also enable the US to build strategic oil reserves/supply buffers.
3. Geopolitical Considerations
Venezuela has historically received substantial Chinese and Russian investment in its petroleum sector.
China became Venezuela’s major oil destination after US sanctions restricted Venezuelan crude exports.
Greater US involvement could therefore reduce Chinese and Russian influence in Venezuela and the wider Americas.
Venezuela also provides a geographically close and potentially reliable source of heavy crude, reducing dependence on heavy-crude suppliers such as Iran and Russia, with whom Washington has difficult relations.
Why Crude Oil Quality Matters
Crude oil is not completely fungible because different grades vary in density, viscosity, sulphur content and processing requirements.
Refineries are configured for particular crude grades; therefore, the availability of a specific type of crude can be as important as overall oil availability.
Venezuela’s heavy sour crude is particularly relevant to US Gulf Coast refineries designed to process such grades.
Proposed US–Venezuela Arrangement
The precise legal and commercial structure remains unclear.
Reports suggest a new private company could be jointly owned by US interests and an operator, with the US side holding around 55% operational control.
The company could develop 17 oil fields, while US buyers would reportedly purchase crude at cost.
The Venezuelan government estimates the arrangement could generate around $100 billion in private investment and more than $209 billion in tax revenues.
Greater foreign ownership or operational control could, however, become politically contentious within Venezuela.
Questions also remain over whether the interim Venezuelan administration has the legal authority to enter into long-term oil agreements; Venezuelan opposition leaders have reportedly criticised arrangements granting extensive US control.
Therefore, the legal structure and legitimacy of the agreement will be crucial.
Venezuela’s Oil Production Collapse
Period
Oil production
1997
3.5 million barrels/day (bpd)
2024
0.9 million bpd
Despite possessing enormous reserves, Venezuela’s production has collapsed because of underinvestment, sanctions, deteriorating infrastructure and broader problems in the oil sector.
Reviving production to late-1990s levels would require a massive, long-term investment cycle.
Challenges to Reviving Venezuelan Oil
Rystad Energy estimated that Venezuela could potentially return to late-1990s production levels only by 2040, even if new investment begins in 2026.
This would require more than $180 billion of investment over 15 years.
Therefore, possessing the world’s largest reserves does not automatically translate into high production; infrastructure, technology, investment, sanctions and institutional capacity are equally important.
China and Russia Factor
Over several decades, China and Russia invested heavily in Venezuela’s petroleum sector, while China became a major buyer of Venezuelan crude under US sanctions.
Greater US control could therefore reshape the existing China–Russia–Venezuela energy relationship.
The agreement can consequently be viewed not only as an energy strategy, but also as an attempt by Washington to limit Chinese and Russian strategic influence in the Western Hemisphere.
