Oil companies compete for projects to boost Venezuelan production, but face a major challenge

ARCHIVE PHOTO: A flare burning natural gas is seen at a heavy crude oil treatment plant operated by the Venezuelan state oil company PDVSA, in the rich Orinoco oil belt, near Cabrutica in Anzoátegui state, Venezuela. April 16, 2015. REUTERS/Carlos García Rawlins/Archive · Reuters

Reuters

Thu, February 19, 2026, 8:04 p.m. GMT+9 11 min read

In this article:

CL=F

+1.34%

CABIMAS, Venezuela, Feb 19 (Reuters) - In September, a well-drilling rig for shallow waters completed its long journey from China to the Venezuelan oil region of Lake Maracaibo.

The passage of the massive and old structure, called Alula, just centimeters below the bridge connecting the city of Maracaibo with the oil fields on the eastern coast of the lake, sparked excitement among residents and workers who had not seen drilling equipment arrive in years due to U.S. sanctions.

The platform struck a pipeline as it passed over the 20,000 kilometers of underwater pipelines lying in the lake. Oil leaked for months before repairs could be completed and the drill was installed in the contaminated lake at the end of the year. Since then, crude production has increased only slightly.

The story of Alula serves as a warning to foreign energy companies, such as U.S.-based Chevron, seeking to expand rapidly in Venezuela and take on short-term projects necessary to boost the country’s oil output. Every step forward often brings new challenges.

Other foreign companies present in the country include Spain’s Repsol, Italy’s ENI, France’s Maurel & Prom, and China National Petroleum Corp.

U.S. President Donald Trump wants American firms to invest $100 billion in rebuilding an oil industry that has suffered 20 years of neglect, mismanagement, and lack of investment under Presidents Hugo Chávez and Nicolás Maduro.

Washington has been easing sanctions since its military incursion to capture Maduro in early January, issuing several general licenses allowing energy companies to export, import, invest, and operate oil and gas projects in the OPEC partner country.

Early expansions could lead the country to increase crude output by up to 500,000 barrels per day (bpd) in just six months, from the current one million bpd, said two executives with assets there.

U.S. Energy Secretary Chris Wright said this month from Caracas that he expects a “drastic increase” in Venezuelan production in the coming months.

Meanwhile, Houston, the U.S. energy capital, and Venezuela’s oil regions are buzzing, with executives mobilizing to seize the business opportunities offered by participating in one of the largest energy industry repair efforts in history.

Continued story  

It is an effort on the scale of the work to boost Iraq’s production after the Second Gulf War or to rehabilitate the Kuwaiti oil fields set ablaze at the behest of Iraqi leader Saddam Hussein.

According to half a dozen workers, experienced Venezuelan oil employees, and executives planning to work there, as well as numerous industry experts and analysts interviewed by Reuters for this article, the first phase in Venezuela would involve some relatively simple projects to quickly increase oil flow.

These are expected to include using drills already in the country, reconditioning closed wells and crude enhancers operating below capacity, as well as repairing ports and pipelines operated by state oil company PDVSA. But even projects that seem simple are actually difficult, experts said. After that, work will become even more complicated.

In early February, a Reuters reporter touring the Lake Maracaibo area saw industry debris, tanks overflowing with crude, abandoned fields, blackened coasts, and long lines of vehicles to buy gasoline near storage terminals and operational areas managed by PDVSA.

All are visible reminders of how much work remains in the region that hosts Venezuela’s oldest production facilities and has the country’s second-largest production capacity.

FIRST STEPS

Among initial steps companies see are projects like the one carried out by China Concord Resources Corp (CCRC), which brought the Alula drill to Venezuela last year.

The company aims to increase production of a mix of light and heavy oil from two fields to 60,000 bpd by the end of this year, up from about 16,000 bpd in December, through a $1 billion program that involves reconditioning up to 875 wells before drilling new ones. CCRC is now trying to resolve several unforeseen issues, from insufficient gas supply to maintain reservoir pressure to data loss and lack of transportation for workers, a project source said.

It’s unclear whether this project will proceed after Trump said that companies from U.S. rivals—China, Russia, and Iran—are no longer welcome in Venezuela.

Under sanctions, companies from those countries were the only ones willing to work in Venezuela. In contrast, Chevron — for years the only major U.S. crude producer in the country — is in a privileged position to achieve early gains.

The company needs the type of light crude that China Concord is producing and is competing with rivals to secure supply in Lake Maracaibo.

Light oil and fuels that can dilute Venezuela’s dense crude are valuable raw materials for energy companies operating in the country. Without crude enhancers or costly diluents, the country’s huge extra-heavy crude reserves cannot be transported or exported.

The promise of relatively easy-to-produce barrels is increasing foreign companies’ appetite to work in highly contaminated or technically complex regions like Lake Maracaibo and North Monagas, which PDVSA has neglected in recent decades as part of its strategy to focus on the prolific and vast Orinoco Belt, further southeast.

Oil around Maracaibo could also be cheaper for Chevron than other regions, especially with low oil prices, because it doesn’t need to be treated before export, said a former employee who worked in Venezuela.

Other options include reopening wells closed due to lack of specialized equipment or power supply, reconditioning low-yield wells to boost production, and drilling new wells, the former employee added, noting that Chevron probably already has a long list of new well locations under consideration.

Chevron said it “has been part of Venezuela’s past and remains committed to working together for its future.” It added that it welcomes recent U.S. licenses and legal reforms in Venezuela.

Venezuela’s Ministry of Hydrocarbons and PDVSA did not respond to requests for comment. Immediate contact with China Concord was not possible.

HEAVY WORK IN ORINOCO

Companies with oil contracts or stakes in projects across the country are competing for access to specialized equipment already there.

There are up to 14 drilling and reconditioning rigs stored for years in Venezuela, owned by SLB, which is headquartered in Houston and is one of the world’s leading oilfield service providers, three sources familiar with its assets said.

SLB has been Chevron’s main service provider since its latest drilling program in Venezuela began in 2024 under a prior U.S. license. Like the American oil company, SLB has many years of experience in the country.

The rigs SLB has in Venezuela were used for PDVSA projects before Washington imposed sanctions in 2019. Subsequently, U.S. companies and those complying with sanctions could not operate rigs or specialized equipment there.

SLB said it still has operational facilities, equipment, and personnel in Venezuela and is in the early stages of coordinating next steps with its clients. “We trust that, under the right conditions and safety environment, we can ramp up activities quickly.”

Drilling and maintenance rigs are very much needed in the Orinoco Belt, where production often employs a system of well groups or clusters.

However, the need for diluents to mix with extra-heavy crude could be more urgent to drain accumulated inventories from recent months and boost exports.

Chevron and other PDVSA partners are focused on securing drilling equipment, access to crude enhancers, and light oil or naphtha that can be used for mixing. The U.S. company also needs to upgrade PDVSA-owned infrastructure, such as the Bajo Grande export terminal.

Additionally, the navigation channel in Lake Maracaibo would need dredging, something that has not been properly done for years due to sanctions preventing the hiring of the necessary dredgers.

To significantly increase production in the Belt, Chevron needs to upgrade its Petropiar project’s enhancer, which converts extra-heavy crude into exportable varieties. This facility has also not been fully repaired for years, two company sources said.

Only five projects in Venezuela, out of more than 40 joint ventures between PDVSA and foreign and local partners, have access to enhancers or blending stations for processing the Belt’s extra-heavy crude, which holds over 80% of the country’s estimated 303 billion barrels of crude reserves.

Companies without enhancers would need to buy costly imported diluents to export barrels, reducing profitability and posing logistical challenges due to Venezuela’s limitations in unloading, transporting, and storing.

North American Blue Energy Partners, linked to U.S. asphalt magnate Harry Sargeant, has been repairing at least one PDVSA-owned rig for its Petrocedeño project in the Belt for months. Completing these repairs could bring the idle equipment online relatively quickly, two sources close to the company said.

North American Blue Energy Partners did not immediately respond to a request for comment.

Independent energy strategist Thomas O’Donnell said many Venezuelan fields decommissioned due to depletion could still have significant production potential.

“Many of those considered dead, exhausted, are not really. PDVSA simply lacked the capacity and equipment to continue exploiting them, and they were carefully selecting the fields,” he explained.

O’Donnell referred to mature fields where seismic studies were last completed in the 1990s or early 2000s using now-obsolete 2D technology.

He said companies could achieve substantial gains by entering operational fields and updating them, potentially generating “perhaps a 50 to 100% increase over current output.”

A service company executive who has worked in Venezuela, speaking anonymously, estimated that the country could increase total production in existing fields to 1.5 million bpd in less than a year, provided the necessary licenses are obtained.

The source said Venezuelan oil fields “are very promising; production can be ramped up significantly,” referring to the abundant reserves. However, supply chain issues and major security concerns, especially around Maracaibo, remain.

The executive also noted ongoing legal uncertainty, as there is no guarantee that current agreements will be respected by future governments.

In January, the National Assembly approved a deep oil reform granting autonomy to foreign companies.

But some of the new contract models—initially pushed by Maduro with limited success—are still considered risky by potential investors, according to oil executives, who say more regulation is needed for these contracts.

Constitutional questions also remain about the long-term legitimacy of the reform. The U.S., European Union, and other countries have not recognized recent parliamentary and presidential election results, which they deemed fraudulent.

Another major risk for investors is that future U.S. administrations could change policies and ease the pressure that has forced Caracas to cede control of its exports and oil revenues to Washington.

A worker at PDVSA’s La Salina terminal near Lake Maracaibo told Reuters that the required investment will be enormous, based on his 22 years working in the area. “The companies coming in have what it takes, but it’s a matter of whether they really want to, once they see the disaster we have,” he said.

(Reporting by Mariela Nava, Marianna Párraga, Ana Isabel Martínez, Nathan Crooks, Sheila Dang, and Deisy Buitrago. Additional reporting by Aizhu Chen. Edited by Javier Leira)

Terms and Privacy Policy

Privacy Panel