The U.S. Could Control 20% of Venezuela’s Oil Reserves. Canada’s Oilpatch Isn’t Worried

The news of a possible US control over 20% of Venezuela’s oil reserves has sent shockwaves through the Canadian energy sector, but experts say there’s little cause for alarm. President Donald Trump touts the deal as a major coup in securing America’s oil supply, but reviving Venezuela’s oil industry will be an uphill battle.

Venezuela boasts some of the largest underground deposits of oil on the planet, but decades of neglect and mismanagement have left its infrastructure in shambles. Oil production has been declining steadily since 1999, from a peak output of 3.7 million barrels per day in 1970 to just 900,000 barrels per day last year.

Canada’s oilpatch, on the other hand, is thriving. The oilsands region in Northern Alberta has become one of the lowest-cost sources of oil in North America, with facilities built and paid off decades ago. This should be a comfort to Western Canada, as its heavy oil production can coexist alongside a potential Venezuelan resurgence.

However, there are still significant hurdles to clear before Venezuela’s oil industry can recover. The country’s political instability is a major concern for any would-be investors, particularly the ongoing power struggle between Maduro and his successor. Even if a future government honors the deal, there’s no guarantee that American companies will be willing to take on the associated risks.

ExxonMobil, one of the world’s largest energy giants, has had its assets seized twice in the past – a prospect that might give even the most optimistic investors pause. A look at history suggests that foreign companies have been wary of investing in Venezuela for good reason.

Some speculate that Trump’s enthusiasm for the deal is merely a ploy to further pressure Canada and other countries to increase their oil exports. By dangling the carrot of Venezuelan oil reserves, Trump may be trying to create a sense of urgency around the issue – and one wonders if this isn’t just another example of his signature brand of brinkmanship.

As Ed Sprague, former deputy energy minister in Alberta, noted, “If the Americans want to pursue this, they are going to have to spend time and an awful lot of money.” Given the uncertain nature of Venezuela’s future, it seems unlikely that American companies will be willing to take on such significant risks.

The real question is what this means for Canada’s energy sector. Will we see a surge in exports as American demand increases? Or will the competition from Venezuelan oil simply drive prices down and squeeze our own industry?

Ultimately, Trump’s Venezuelan oil grab is more than just a long shot – it’s a recipe for disaster, with little chance of success.