Venezuela's Oil Paradox: World's Largest Reserves, Poor Production

The flip of the calendar witnessed start of a new era where the US struck upon Venezuela, capturing its President Nicolas Maduro and his wife.

"Maduro, after being elected as the President in 2013, has been ruling the country mostly by the rule of decree. This event would certainly create a short-term turbulence in the oil markets," according to the report by PL Capital.

Venezuela has the largest proven oil reserves with estimate of 303.8 billion barrel (2020), trailed by 297.5 billion bbl of Saudi Arabia.

"The next three largest reserves are way behind at 168.1 bn bbl, 157.8 bn bbl and 145 bn bbl with Canada, Iran and Iraq respectively. To keep things in the perspective, the largest consumer, the United States has meagre 68.8 bn bbl of reserves," said Swarnendu Bhushan, Research Analyst, PL Capital.

However, due to several factors, Venezuelan production has been way disappointing with barely 1 million barrels of oil per day (bopd) in November 2025 compared with the United States at 13.7 million bopd and Saudi Arabia at 9.7 million bopd.

"In fact, Venezuelan production is one-third of what it used to be a decade back," said Bhushan.

The prolific reserves of Venezuela have been a public knowledge since ages. In fact, going back to 1970, one can see that Venezuela was indeed one of the largest oil producers with 3.7 million bopd, trailing behind 11.7 mn bopd of the United States and 7.1 mn bopd of the then USSR, but at par with Saudi Arabia at 3.9 mn bopd.

"In the meantime, what is sure is that there is no Elder Wand of Harry Potter, the use of which is going to raise Venezuelan oil production immediately. Even for the first traces of this to appear, it would take at least 3-6 months," the report noted.

In the short-term, the risk premium is expected to rise with global uncertainties and there may be minor spike as well depending upon how Russia and China respond to this.

With Brent at $60 per bbl, "we place our bets on upstream companies ONGC and Oil India. The oil marketing companies (OMCs) are set to retain their profitability with low oil prices," the report mentioned.

However, the recent excise hike in cigarettes also signals towards a probable rise in excise duty for petrol and diesel, with OMCs expected to absorb like in April 2025 and makes us wary, especially at current rich valuations, Bhushan said.

- IANS