Located in eastern Venezuela, the Orinoco Oil Belt wants to return to its golden age. Still, it faces political, economic, and technical challenges.
The treasure of the Orinoco Oil Belt. Venezuela has the largest proven oil reserves in the world: 300 billion barrels. To put this in perspective, Saudi Arabia has reserves of 267 billion barrels in its territory.
The Orinoco Oil Belt holds most of Venezuela's crude oil. It’s a region of approximately 21,000 square miles in the eastern part of the country, extending across the Orinoco Basin.
It’s rich in heavy and extra-heavy oil, a dense and viscous type of petroleum that requires more costly and sophisticated extraction and refining processes to convert into usable products such as gasoline and diesel.
The 21st country in oil production. The Orinoco Oil Belt has existed since January 1936, when the U.S. company Standard Oil of New Jersey drilled the first well, “La Canoa-1,” in the state of Anzoátegui.
Despite its age, this region remains the biggest crude reserve ever discovered. However, it has been unable to move forward due to political sanctions and the technical and economic problems surrounding it.
At its peak, Venezuela produced three million barrels of petroleum a day. Today, at 770,000 barrels daily, it’s the 21st largest oil-producing country in the world, behind even neighboring Colombia. The U.S., Russia, and Saudi Arabia lead the way with 8-12 million barrels produced daily.
A challenge and an opportunity. In October 2023, the U.S. government lifted its sanctions on Venezuelan petroleum for six months, allowing foreign companies to tentatively return to the Orinoco Oil Belt.
The moratium showed that Venezuela’s oil sector has problems that aren’t political but structural. After years of neglect, corruption, and economic crises, the Venezuelan petroleum sector needs foreign investment to modernize the costly infrastructure used to extract and process heavy oil.
Although the U.S. government restored the sanctions in April when President Joe Biden sought to put pressure on the government of Venezuelan President Nicolás Maduro, foreign companies now can obtain individual licenses to mitigate their impact, offering a glimmer of hope for a country where oil remains an economic engine.
Latin America’s oil boom. Upgrading infrastructure, attracting foreign investment, and stabilizing the economy are crucial. Still, it remains to be seen whether they’ll be enough to unleash the full economic potential of the Orinoco Oil Belt.
The conditions seem favorable. Latin American countries are in the midst of an “oil gold rush,” the most extreme case being that of neighboring Guyana, which saw its GDP grow by 33% in 2015 due to reserves discovered off its coast. Meanwhile, Brazil has climbed to 8th place in world oil production, and Mexico is in 11th place.
The question for all these countries is the same: What will happen to their investments when oil demand drops, as expected, because of the energy transition? For now, much of the world is acting as if we'll continue to burn oil for many years. Maybe that's the answer.
This article was written by Matías S. Zavia and originally published in Spanish on Xataka On.
Image | EFOFAC | Wilfredor
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