(The Center Square) – The highly complex refineries located on the U.S. Gulf Coast could resume processing heavy Venezuelan crude oil in the years following the capture of President Nicolás Maduro, possibly pushing out Canadian oil processed at the facilities, according to industry experts.
But the potential benefits of a Venezuelan oil revival hinge on whether American companies comply with President Donald Trump’s expectations, which include spending billions of dollars to repair the country’s oilfields while its fragile government is rebuilt.
Venezuela sits atop the largest proven crude oil reserves in the world, at 303 billion barrels, about 17% of the globe’s total recoverable underground fossil fuel stockpiles, according to the U.S. Energy Information Administration.
Its oil production has declined sharply in recent years due to mismanagement and economic sanctions. Venezuela’s output neared 3.5 million barrels a day in 1997, but now produces between 1 million and 1.5 million barrels per day, which is about 1% of global crude production, said Ed Hirs, energy fellow at the University of Houston, in an interview with KRIV-TV.
While the country for now remains under the regime of Maduro, who was seized by the Trump administration last weekend, U.S. Secretary of State Marco Rubio has said a “maritime blockade” or “oil quarantine” will be implemented to “enforce compliance” with American interests. Venezuela’s main oil ports on Tuesday entered a fifth consecutive day without ships carrying oil bound for Asia, the country’s main customer, according to shipping data viewed by Reuters.
Many refineries on the U.S. Gulf Coast are specifically engineered to process the “heavy sour” crude oil typically produced in Venezuela and used for the manufacturing of diesel, jet fuel and asphalt. Most refineries in other parts of the U.S. are designed to process the lighter, sweeter crude oil produced in America’s shale basins.
Chevron, the only U.S. oil company currently active in Venezuela, operates a high-capacity refinery in Pascagoula, Mississippi capable of processing 369,000 barrels per day of heavy crude. Chevron also operates two refineries in El Segundo and Richmond, California configured to process heavy crude oil with capacity of 515,000 barrels per day.
Another major oil company, Valero, operates refineries in Corpus Christi and Port Arthur, Texas and in Norco, Louisiana that can together process up to 925,000 barrels per day of heavy oil. Marathon Oil operates a 631,000 barrels per day refinery in Galveston Bay, Texas and a 606,000-barrels-a-day facility in Norco, Louisiana, both of which process heavier crude oil.
ExxonMobil’s Baton Rouge refinery in Louisiana and its Beaumont refinery in Texas are together capable of processing 1.15 million barrels heavy crude oil per day.
Louisiana Mid-Continent Oil & Gas Association President Tommy Faucheux said refiners in the state are watching how the events in Venezuela affect the global market.
“Louisiana has the refineries capable of processing the heavy crude found in Venezuela. So, if there is an increase in refining demand, Louisiana will have the ability to play a part,” he said.
Trump has said he expects U.S. oil companies to invest heavily into fixing “the badly broken infrastructure” in Venezuela. He told NBC News the companies could “get reimbursed by us, or through revenue.” None of the large companies has committed so far, although meetings between them and the administration have reportedly been scheduled.
Industry experts estimate the cost to repair the decayed pipelines, rigs and other infrastructure could exceed $100 billion.
“To accomplish the president’s goals it’s going to take billions of dollars of reinvestment, rebuilding Venezuela’s oil infrastructure completely. It will take years,” said Hirs, the University of Houston fellow.
Commodities analyst and Fox News Contributor Phil Flynn noted another factor in the investment decisions: Venezuela’s leadership remains hostile toward the U.S. Flynn wrote in a market commentary that without a stable, pro-Western government, foreign investment in Venezuelan oil production is unlikely to materialize soon.
“This political uncertainty casts doubt on the feasibility of a quick recovery. Yet I argue that while there are challenges, do not underestimate the U.S. Energy Industry to blow away those expectations, especially with the backing and security of the U.S. and the Trump Administration that values the resources and we will control one third of global oil supply,” Flynn wrote.
The news of Maduro’s capture sparked a massive rally in major oil and energy stock prices, he said. In midday trade Monday, Chevron had soared 11%, Valero leaped 11% and ConocoPhillips and Marathon each jumped 10%. Exxon Mobil rose 7%, Phillips 66 climbed 6%, and both Occidental Petroleum and EOG Resources gained 4%, Flynn said.
Schlumberger, known for infrastructure expertise, surged nearly 8% early Monday, while Halliburton, with decades of exploration and drilling experience in Venezuela, was up 7%, Flynn said.
