StonePoint Real Estate Team

January's Feature article:

Our Deep Dive into the Probable Impact of Venezuelan Oil on the Alberta Energy Sector:

Venezuela possesses roughly 300 billion barrels of proven oil reserves, much of it extra-heavy crude. In the early 2000s, national production exceeded three million barrels per day. Today, output is closer to one million barrels per day, reflecting years of underinvestment, infrastructure decay, loss of skilled labor, and the effects of international sanctions.

Oil facilities across the country — including wells, pipelines, upgraders, and export terminals — are aging and poorly maintained. Industry estimates suggest that merely stabilizing current production levels would require tens of billions of dollars in capital. Returning output to even two million barrels per day could take a decade or more and would likely require total investments above $100 billion.

Venezuela’s oil closely resembles Alberta’s production in one key respect: both are heavy, high-sulfur crudes that require complex refining. The primary market for these barrels is the U.S. Gulf Coast, where specialized refineries are designed to process such grades and which in previous decades was centred around Venezuelan oil. While the overlap raises the prospect of direct competition, Venezuela faces significant logistical constraints. Many of its upgrading and blending facilities are offline, forcing the country to import diluents to move its oil. Export infrastructure is also unreliable, with frequent disruptions at ports and storage facilities.
These limitations restrict Venezuela’s ability to supply consistent volumes, reducing its competitiveness against Canadian producers, who benefit from stable operations and expanding pipeline access.

The recent U.S. removal of Nicolás Maduro has potentially opened the oil sector to greater private and foreign participation. Investor confidence in the country remains fragile. Venezuela’s history of expropriation, weak institutions, corruption, and unresolved disputes with previously nationalized companies continues to weigh heavily on international corporations. In addition, U.S. sanctions — while partially eased — remain conditional and subject to political shifts from future administrations, limiting long-term planning for energy companies. Foreign firms have taken a cautious approach, focusing on limited production recovery rather than large-scale expansion.

Short-Term Impact:
Over the next one to five years, most analysts expect Venezuelan production to increase only modestly, if at all. Even optimistic projections suggest gains of only a few hundred thousand barrels per day, constrained by infrastructure bottlenecks and slow capital inflows.

For Alberta’s oil industry, this implies minimal short-term price disruption. Canadian oil sands production is supported by long-life reserves, established supply chains, and improving market access through projects such as the Trans Mountain expansion. Global oil demand remains resilient, and spare capacity is relatively tight, meaning additional Venezuelan supply is unlikely to significantly depress prices in a sustained way.

Medium-Term Impact:
In the medium term (5-9 years), the impact is also likely to be relatively modest. Even if political reform takes hold, Venezuela’s institutions (judiciary, electoral bodies, security forces) remain weak or compromised by decades of politicization. Strengthening them is essential for stability and foreign investment but typically takes many years — not just a few — especially in contexts marked by entrenched factions and skepticism among the populace. Officials and organizations accustomed to wealth generated through corruption are going to be highly resistant to supporting change, and will undermine processes to protect their personal interests.

Venezuela also has a complex landscape of armed groups, including foreign guerrillas, domestic criminal gangs, and pro-government paramilitary forces known as “Colectivos” that are loyal to Nicolás Maduro. These groups operate with significant autonomy, often controlling illicit markets, border regions, and enforcing social control, particularly in western border states. If political transitions threaten established criminal networks, they may use violence or sabotage to further disrupt the industry. This risk reduces investment appetite.

That said, if a stable government is realized, Venezuelan oil production could rise to 1.3–1.5 million bpd by 2030. Reaching these levels requires an estimated $3.2 billion in annual investment to repair aging infrastructure and decayed equipment.

Long-Term Impact:
The long-term implications are less clear as it depends heavily on Venezuela’s political trajectory. Major U.S. oil firms are currently in a "wait-and-see" mode and are not making plans for heavy investment any time soon. Plus the question is whether the math really makes sense given other potential oil accessibility vs investment requirements elsewhere in the world.

Venezuela is a very large country, the 32nd largest in the world and political reform is a difficult process. Poor transportation infrastructure, diverse terrain and regional corruption significantly hinders its ability to achieve political stability. Colombian guerrillas (ELN), dissident FARC rebels, and criminal gangs to control vast tracts of land. Key natural resources and mining operations are often located far from the capital in regions where criminal organizations, rather than the state, hold sway.

The Venezuelan military also faces significant challenges in policing the vast, treacherous border regions, particularly the border with Colombia, which has become a hotspot for smuggling and trafficking. Conversely, the population is heavily concentrated (85%) in the northern coastal-mountain region. While this makes the core urban areas easier to manage, the vast, ungoverned, or under-governed territories in the south and along the borders create a "staircase" of instability that renders national, long-term stabilization difficult.

But IF ultimate political stability is reached, then the potential for more foreign investment does increase. Is it worthwhile financially? That's yet to be determined. But if large-scale foreign investment materializes, Venezuelan production could eventually approach two to three million bpd in the next 15 to 20 years. That would require a massive investment — estimated at $100 billion to as much as $180 billion U.S. over the next 15 years. This need for massive upfront capital in an era of constrained oil investment and the country's potential for instability in the future may ultimately limit how far and how fast its production can or will recover or grow.

BUT - with three million bpd being produced by Venezuela’s oil industry, it would reintroduce a major heavy crude supplier into global markets that in the long term that would almost certainly impact overall oil prices, and would absolutely intensify competition for refinery demand at U.S. gulf refineries hurting Alberta. That would be a big problem if nothing is done to get our heavy oil to other markets. It would still create some downward pressure on heavy crude price differentials, affecting margins for Canadian producers, but most critically if we remain landlocked.

This impact potential highlights the vital importance of continued diversification for Alberta’s oil industry. Expanding access to Asian markets, investing in upgrading and refining capacity, and continuing to lower production costs would help mitigate future competitive pressures. Alberta’s investments in emissions-reduction technologies, including carbon capture and storage would also strengthen its competitiveness relative to Venezuelan oil, which currently has higher emissions intensity and weak regulatory oversight.

What's the Result??
Through our research, it seems real concern for Alberta isn't immediate or likely severe. There is ample time to protect the energy sector if action is taken immediately to diversify our market access. This would ensure we have options beyond US gulf refineries. Investment into new pipelines to tide water can be completed before major Venezuelan oil investment projects would be finished. Plus if investment into Venezuelan production never materializes, Alberta and Canada would be significantly less reliant on our unpredictable partners to the south.

We’d love your feedback - AND any input if you have insight that would to add, change or improve our understanding of things!!