A word about Venezuela

However, its meaning is pretty clear. In a lighter moment Woods might like to consider the following lyric adapted from Unforgettable, the trademark song of the legendary Nat King Cole: 

Uninvestable

That's what you are

Uninvestable

Though near or far

Obviously, President Donald Trump would not be amused. He met with US oil company executives shortly after the capture and abduction of President Nicolás Maduro and his wife to interest them in his plan to take over the running of the Venezuelan oil industry indefinitely and control its exports. A vital part of this extraordinary intervention in another country’s government was Trump’s apparent assumption that American oil companies would willingly step in to revitalise the disastrous condition of Venezuela’s hydrocarbons extraction industry, once the envy of the world. 

Trump must have thought the deal was handing back to the US industry access to the country’s enormous potential oil wealth. Although some believe the numbers may be inflated, Venezuela’s 300 billion barrel reserves, located mainly in the Orinoco oil belt, are said to be the largest in the world. How recoverable and at what cost this almost exclusively heavy oil may be is another question. As a further enticement, the Trump Administration was pushing the contested claim that control of Venezuela’s production would enable recovery of oil that was ‘stolen’ from licensed US companies as part of the country’s nationalisation strategy formalised in the 1970s. It is true that companies (notably ExxonMobil and ConocoPhillips) are owed billions from sequestration of their assets and continue to pursue their claims in international courts.

In a statement after the meeting with Trump, the ExxonMobil CEO issued a carefully crafted statement that ruled out immediate investment – uninvestable – but left the door ajar if certain conditions were met. That did not go down well with the president who said he was ‘inclined’ to leave ExxonMobil out of future US industry participation in Venezuela. Yet Woods provided a perfect rationale of big oil thinking – and what it leaves out.

What Woods sidestepped was that Venezuela’s fortunes for the past century have depended on production of its oil resources, often perilously beholden to the US. Safe to say it has not gone well. The country is a disaster featuring a corrupt tyrannical government, crumbling infrastructure, widespread poverty, large-scale emigration, and of course a barely functioning oil industry, virtually the only source of income. 

The country can certainly be categorised as an early victim of the ‘oil curse’. As such the oil companies who flocked to Venezuela in the 1920s and proceeded to build a stunningly successful production machine cannot be absolved from some complicity in today’s tragic mess. 

The oil experience in Venezuela began in 1914. Caribbean Petroleum, a Shell subsidiary, drilled the successful Zumaque 1 well, establishing the Mene Grande field in the Maracaibo Basin as the country’s first oilfield to go into operation, its development slowed by the onset of the First World War. It was the infamous blowout in 1922 of another Shell well, Barroso 2 in Cabimas, Zulia state, that effectively acted as an advertisement for Venezuela’s petroleum potential, although a local ecological disaster. A column of oil jetted out of the well at 100,000 b/d for a week. The incident proved a potent signal for the start of the oil boom. By 1929 Venezuela was the world’s leading exporter and a decade later was only behind the US and Russia in its production. Three companies Gulf, Shell and Exxon controlled some 98% of the Venezuelan oil market.

'By 1929 Venezuela was the world’s leading exporter'

This was an unexpected outcome for a country that only fully achieved its independence from Spain in 1830, thanks in part to the interventions of the legendary Simón Bolívar. For the rest of the century it languished as an impoverished agricultural economy mainly exporting coffee and cocoa, and ruled by a succession of regional military caudillos. 

The key figure in Venezuela’s early oil history was Juan Vicente Gómez, who in 1908 ousted Cipriano Castro as president in a coup d’etat and retained power until his death in 1935 either as president or the power behind the scenes. His governing style was dictatorial, ruthlessly suppressing opposition, but he understood the significance of oil as transformative for both the country and his personal wealth. 

The tone was set by the 1922 Hydrocarbons Law based on concessions. This required foreign companies to pay state royalties and taxes but allowed them a free hand to produce and export crude oil, much of it processed along the Gulf of Mexico coast, thereby setting up an early dependence on US facilities. Gomez is credited for using the oil revenues to build some basic infrastructure and pay off the debts accrued by his predecessor, but his policies did not do much to improve the lot of the majority, for example, having little time for education and trade unions. 

Gomez’s departure brought to the surface an underlying popular resentment at the perceived lack of benefit from – and to a degree, participation in – the ongoing oil bonanza (by 1940 producing 27 million tonnes per year). Possibly emboldened by the 1938 nationalisation of the petroleum industry in Mexico and the creation of Pemex and a government at home edging towards a more democratic system, the ruling regime enacted more aggressive hydrocarbon regulations. Royalties rose from no more than 11 to 16 and two-thirds per cent, and concessions were limited to a further period of 40 years. A profit-sharing deal – the so called fifty-fifty rule – was enshrined in legislation by President Rómulo Betancourt, ‘the father of Venezuelan democracy,’ in his first brief period as president (1945-48) before being ousted in a military coup. The arrangement remained in place until 1976, despite initial oil industry outrage.

In fact, the post-Second World War period was astonishingly profitable for Exxon at least, through its Creole Petroleum unit. According to one account, the company’s output in Venezuela soared from about 400,000 b/d in 1945, to 660,000 b/d in 1950, to almost 1.5 million b/d in 1974 with Creole providing for as much as 40% of Exxon’s global profit.

The first omen that the golden era could not last was when Venezuela proved an active founder of OPEC in 1960 initially with Iraq, Iran, Kuwait, and Saudi Arabia. The idea was for producing nations to limit the control on production and prices exerted by the oligopoly of major oil companies.

However, the fateful year was 1976. Following the 1973 oil crisis in which oil prices rocketed in producers’ favour, Venezuela under President Carlos Andrés Pérez, transferred control of the oil industry from foreign companies to the state, in the process creating Petróleos de Venezuela, S.A. (PDVSA). It was an orderly transition for which oil companies felt poorly compensated. A telling reflection on the motive for the nationalisation move can be found in a speech by Felix P. Rossi-Guerrero, at some point Venezuelan minister counselor for petroleum affairs, published in Vanderbilt Law Review (1976), in which he explains the 'disbelief then anger at the betrayal by the US'. Venezuela had cooperated in boosting its production to help the US in times of crisis, e.g., the Second World War, Korea, Suez, etc. But when President Dwight Eisenhower introduced a quota system on oil imports to protect domestic producers in 1959, he gave preferential treatment to Canada and Mexico.

Post nationalisation of its oil production, Venezuela’s oil sector sustained production of 3 million b/d, contributing around 25% of gross domestic product, more than half the country’s revenue, and between 80 and 90% of total exports, according to data from the World Bank and the US Energy Information Administration. 

This perilous over-dependence on oil unravelled when the revolutionary Hugo Chávez swept to power in 1998 on the promise of ending corruption, increased spending on social programmes, and redistributing the country’s oil wealth. His radical agenda soon invoked national protest including a general strike involving 38,000 PDVSA employees, half of whom were fired at the end of the dispute, significantly harming the efficiency of future oil production which fell into a decline from which it has never properly recovered. Overseas, the close relationship with Cuba and support for regimes in countries like Iran, Iraq and Libya won the regime no friends. Oil companies, including Exxon left in 2007 under the duress of new oppressive regulations, leaving Chevron as the only active company responsible for around 10% of the country’s output.

'Perilous over-dependence on oil unravelled'

As we all know, Chávez’s ruthless successor, President Nicolás Maduro, now in US custody, did little to salvage Venezuela’s plight and leaves a country in limbo chastened by its reliance on oil. Among other issues, the country has been subject to periodic sanctions, and a UN report estimated in March 2019 that 94% of Venezuelans live in poverty and that one quarter of the population needs some form of humanitarian assistance.

Meantime, according to OPEC data, crude exports plunged from nearly two million barrels per day in 2015 to less than 500,000 in 2021, although a partial recovery has been observed since 2023: 655,000 barrels per day in 2024 and 921,000 barrels per day in November 2025.

A bleak analysis by Rystad Energy suggests recovery of the Venezuelan oil and gas sector would require investment of some $183 billion between now and 2040 to get the country back to crude production of 3 million barrels per day by 2040, 

No wonder Exxon Mobil’s Woods will be a reluctant investor, especially when prospects in neigbouring Guyana are proving so rewarding, assuming he doesn’t take too seriously Venezuela’s longstanding claims to some of the territory. He will probably want to stick with:

Uninvestable

In every way

And forevermore

That's how you'll stay.

Views expressed in Crosstalk are solely those of the author, who can be contacted at andrew@andrewmcbarnet.com.