Venezuela Enters New Phase in Upstream Oil Industry

Following sweeping hydrocarbon reforms and significant geopolitical developments in early 2026, Venezuela's upstream oil industry has entered a new phase. The conversation has shifted from whether the country could reopen its oil sector to whether it can successfully achieve meaningful production recovery.

The resource potential of Venezuela has never been in doubt. The greater challenge now lies in translating policy momentum into sustainable operational growth.

Production Growth Forecasts

According to estimates by Rystad Energy, Venezuela's crude production could increase by approximately 17%, equivalent to about 194,000 barrels per day (bpd), between Q4 2025 and Q4 2028. Notably, this growth is projected to come primarily from existing production assets rather than from large-scale discoveries, emphasizing that execution rather than resource availability will determine the pace of recovery.

Heavy Oil Types to Dominate Growth

Short-term production growth will be dominated by heavy oil types. Approximately three-quarters of Venezuela's production by 2028 is projected to come from heavy oil, extra-heavy oil, and bitumen, with the Orinoco Oil Belt accounting for about 60% of total production. This makes access to diluent, well workover operations, infill drilling, and mature field management significantly more important than adding reserves in the coming years.

International Companies Driving Recovery

International oil companies (IOCs) are expected to contribute nearly two-thirds of Venezuela's forecasted production growth by 2028. Chevron continues to be the largest contributor, followed by Repsol, Eni, Maha Energy, and Maurel & Prom. Much of this growth is projected to come from expanding production at existing joint ventures, reflecting new investments following regulatory changes and sanctions relief rather than greenfield development projects.

Chevron's Strategic Position

Chevron continues to hold a particularly strategic position. Recent adjustments to its portfolio have enhanced the company's access to the Orinoco Oil Belt, while future production growth is projected to depend on optimizing old field assets, infill drilling, and phased development of Ayacucho 8. Beyond Chevron, companies like Eni and Repsol continue to play a dual role in both Venezuela's crude oil and natural gas sectors through assets including the Cardón IV block and the giant Perla gas field.

However, international participation remains highly selective. Companies continue to balance the opportunities presented by Venezuela's vast resource base with fiscal uncertainty, operational complexity, and long-term investment risks.

Execution, Not Geology, Is the Main Barrier

While policy reforms have improved investment prospects, they haven't removed the operational bottlenecks that have constrained production for many years. Sustainable production growth will require continuous access to diluent, higher drilling activity, extensive well workover campaigns, improved infrastructure, and significantly greater drilling rig availability.

These operational requirements represent the critical link between resource potential and actual production. Financial competition also remains a significant factor. International operators have indicated that future capital commitments will depend on further improvements in Venezuela's financial framework, particularly around royalty rates and taxes. Lower project breakeven costs through more competitive financial terms could significantly improve investment economics and encourage broader participation across the sector.

Oil Services Could Become a Shaping Barrier

Perhaps the greatest challenge to Venezuela's recovery lies beyond the main upstream operators. Venezuela's Ministry of Oil has identified a need for 93 active drilling rigs by 2028, a significant increase from current operational levels. Achieving this target will require a phased expansion involving reactivating domestic drilling rigs, refurbishing idle equipment, and ultimately importing additional drilling rigs from the international market.

This creates significant opportunities for drilling contractors and oil service providers but also highlights the scale of the execution challenge. Companies must balance equipment mobilization costs, contract term requirements, and country risk before committing capital. Local contractors have begun reactivating existing fleets, while international service providers remain more cautious, awaiting further evidence that recent policy reforms will translate into a stable, commercially attractive operating environment.

Rebuilding Operational Capacity

As a result, rebuilding operational capacity may ultimately prove as important as attracting upstream investment. Rebuilding operational capacity could be a particularly significant challenge, requiring close collaboration between government, operating companies, and service providers to rebuild infrastructure and human resources that have been diminished over decades.

Next Phase Depends on Execution

The Hydrocarbon Law 2026 represents one of the most important structural reforms for Venezuela's upstream sector in decades. By expanding private sector participation and introducing greater financial flexibility, the legislation has created a more attractive framework for future investment.

However, legislation alone cannot restore production. The pace of implementation, fiscal policy stability, continued sanctions relief, and the industry's ability to rebuild operational capacity will ultimately determine whether Venezuela can transform ambition into sustainable production growth.

Opportunities and Challenges

For investors and operators, the opportunities are significant. But Venezuela's upstream recovery will depend less on the scale of its resource base than on its consistent execution in drilling, infrastructure, services, and investment policy. That execution gap, not geology, is likely to shape Venezuela's production trajectory for the remainder of this decade.

Venezuela's success will depend on its ability to combine vast resource potential with strong execution capabilities. The policy reforms have created the foundation, but turning that foundation into sustainable production recovery will require significant commitment from all stakeholders.

Analysis provided by Rystad Energy