{"id":104603,"date":"2026-01-14T10:28:24","date_gmt":"2026-01-14T10:28:24","guid":{"rendered":"https:\/\/neclink.com\/index.php\/2026\/01\/14\/venezuelan-oil-and-the-limits-of-u-s-refining-capacity\/"},"modified":"2026-01-14T10:28:24","modified_gmt":"2026-01-14T10:28:24","slug":"venezuelan-oil-and-the-limits-of-u-s-refining-capacity","status":"publish","type":"post","link":"https:\/\/neclink.com\/index.php\/2026\/01\/14\/venezuelan-oil-and-the-limits-of-u-s-refining-capacity\/","title":{"rendered":"Venezuelan Oil and the Limits of U.S. Refining Capacity"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<div>\n<p>Yves here. Many commentators have described the sorry state of Venezuela\u2019s oil industry and taken a stab estimating what it would take to turn that around. The near-universal view is that it would take many years of large-scale, sustained investment before any serious change in output was realized. This post usefully recaps that issue and then looks at the US refining side of the equation, identifying what it takes to process such heavy, nasty crude and the proportion of US refineries now able to handle that.<\/p>\n<p>We are also reposting a particularly informative tweet that estimated the cost of a comprehensive upgrade of Venezuela\u2019s oil production, including oft-neglected expenses to upgrade and greatly extend Venezuela\u2019s grid. Note that the aim is to replace Canada\u2019s heavy crude grades in the US, as in supply refiners set up to handle broadly similar feed stocks:<\/p>\n<blockquote class=\"twitter-tweet\">\n<p dir=\"ltr\" lang=\"en\">I have spent a lot of time talking shit at people with opinions on Venezuela\u2019s oil production potential, and how it\u2019s going to \u201cRePLaCe CanADa\u201d. So here\u2019s my contribution \u2014 how I see the cost of replacing Canadian crude with Venezuelan heavy.<\/p>\n<p>I think it\u2019s a nearly $1 trillion\u2026 <a href=\"https:\/\/t.co\/XFlPVwPdew\" target=\"_blank\" rel=\"nofollow\">pic.twitter.com\/XFlPVwPdew<\/a><\/p>\n<p>\u2014 Michael Spyker (@ShaleTier7) <a href=\"https:\/\/twitter.com\/ShaleTier7\/status\/2007936384448024898?ref_src=twsrc%5Etfw\" target=\"_blank\" rel=\"nofollow\">January 4, 2026<\/a><\/p>\n<\/blockquote>\n<p><em><strong>By Alex Kimani, a veteran finance writer, investor, engineer and researcher for Safehaven.com. Originally published at <a href=\"https:\/\/oilprice.com\/Energy\/Crude-Oil\/Venezuelan-Oil-and-the-Limits-of-US-Refining-Capacity.html\" rel=\"nofollow\" target=\"_blank\">OilPrice<\/a><\/strong><\/em><\/p>\n<ul>\n<li>Trump\u2019s push to lure U.S. oil majors back to Venezuela largely fell flat, with Exxon and ConocoPhillips calling the country uninvestable under current laws and citing past expropriations.<\/li>\n<li>Venezuelan crude is attractive to complex U.S. refiners with coking capacity, but only a subset of Gulf and East Coast plants can fully process the heavy, high-sulfur oil.<\/li>\n<li>Higher Venezuelan supply would displace Canadian, Mexican, and some Middle Eastern grades rather than broadly lift U.S. demand.<\/li>\n<\/ul>\n<p>Last week, U.S. President Donald Trump\u2019s Venezuela pitch to oil executives to invest the vast sums required to revive the country\u2019s flagging oil sector proved largely ineffectual. <strong>Exxon Mobil <\/strong>(NYSE:XOM) CEO Darren Woods offered the starkest assessment, calling the South American country \u201c<a href=\"https:\/\/oilprice.com\/Company-News\/ExxonMobil-CEO-Tells-Trump-Venezuela-Is-Uninvestable-Without-Major-Reforms.html\" target=\"_blank\" rel=\"nofollow\">uninvestable<\/a>\u201d under its current commercial frameworks and hydrocarbon laws, while <strong>ConocoPhillips <\/strong>(NYSE:COP) CEO Ryan Lance also gave Trump a <a href=\"https:\/\/oilprice.com\/Energy\/Crude-Oil\/Trumps-Venezuela-Oil-Plan-Runs-Into-Hard-Reality.html\" target=\"_blank\" rel=\"nofollow\">reality check<\/a>, informing him his company lost billions of dollars when it exited the country under the Chavez regime.<\/p>\n<p>The serious descent of Venezuela\u2019s energy sector into the abyss began after Hugo Ch\u00e1vez\u2019s government nationalized the oil infrastructure and assets of <strong>ExxonMobil<\/strong> (NYSE:XOM) and <strong>ConocoPhillips<\/strong> (NYSE:COP) in 2007, after the companies refused to accept new terms that would give the Venezuelan state oil company, PDVSA, a majority share in their projects. The nationalization process was initiated in early 2007 through a presidential decree and a new Hydrocarbons Law.<\/p>\n<p>Trump, however, <a href=\"https:\/\/www.wsj.com\/business\/energy-oil\/trump-presses-oil-executives-to-invest-in-venezuelabut-gets-lukewarm-reception-6e4efd78\" target=\"_blank\" rel=\"noopener nofollow\">scored some notable wins<\/a>. To wit, <strong>Hilcorp<\/strong>\u2018s Jeff Hildebrand said his company is ready to go rebuild Venezuela\u2019s energy infrastructure, while <strong>Chevron<\/strong> (NYSE:CVX) said it can ramp up its Venezuela production of 240K bbl\/day \u201c100% essentially effective immediately\u201d.<\/p>\n<p>Previously, we <a href=\"https:\/\/oilprice.com\/Energy\/Energy-General\/Why-Trump-Underestimates-the-Challenge-of-Reviving-Venezuelas-Oil.html\" target=\"_blank\" rel=\"nofollow\">reported <\/a>that it will take billions in infrastructure investments to return Venezuela\u2019s oil sector to its 1970s peak production of 3.5 million barrels per day. Venezuela currently produces ~1 million barrels per day, with Chevron accounting for a quarter of that. U.S. refiners love Venezuelan crude because it provides a competitive advantage for complex refiners with substantial coking capacity that can process the heavy oil into high-value products. Merey crude from Venezuela\u2019s Orinoco belt has among the lowest in API gravity and highest sulfur content globally, requiring specialized refinery units to break down the heaviest molecules and remove impurities.<\/p>\n<p>Unfortunately, <a href=\"https:\/\/www.reuters.com\/markets\/commodities\/why-venezuela-oil-wont-flood-us-market-2022-11-29\/\" target=\"_blank\" rel=\"noopener nofollow\">less than half of U.S. refineries<\/a> have a coker, with refiners along the Gulf and East Coasts most likely to benefit from higher Venezuelan crude supplies. U.S. refiners with the highest coking capacity include <strong>Valero<\/strong> (NYSE:VLO), Exxon, Chevron, <strong>Marathon Petroleum<\/strong>(NYSE:MPC), <strong>Phillips 66 <\/strong>(NYSE:PSX) and <strong>PBF Energy <\/strong>(NYSE:PBF).<strong>\u00a0<\/strong><\/p>\n<p><a href=\"https:\/\/www.reuters.com\/markets\/commodities\/what-is-coking-and-why-it-matters-for-oil-refiners-2023-06-16\/\" target=\"_blank\" rel=\"noopener nofollow\">Coking and hydrocracking<\/a> are petroleum refining processes that upgrade heavy crude oil fractions into lighter, more valuable products like gasoline, diesel, and jet fuel, but they use different methods: Coking is a thermal, carbon-<em>rejection<\/em> process, essentially baking heavy oil to leave solid petroleum coke and lighter liquids. Hydrocracking uses high-pressure hydrogen and a catalyst to chemically <em>add<\/em> hydrogen, breaking large molecules into smaller ones, producing cleaner fuels with fewer solid byproducts. Highly complex refiners can achieve distillate yields of 33% compared to 30% for medium-complexity plants. Shortages of heavy oils like Venezuelan crude have forced many U.S. refineries to invest in topping units to refine lighter oils such as U.S. shale oil.<\/p>\n<p><img fetchpriority=\"high\" fetchpriority=\"high\" decoding=\"async\" class=\"aligncenter size-full wp-image-304044\" src=\"https:\/\/www.nakedcapitalism.com\/wp-content\/uploads\/2026\/01\/00-refining.jpg\" alt=\"\" width=\"512\" height=\"324\" srcset=\"https:\/\/www.nakedcapitalism.com\/wp-content\/uploads\/2026\/01\/00-refining.jpg 512w, https:\/\/www.nakedcapitalism.com\/wp-content\/uploads\/2026\/01\/00-refining-300x190.jpg 300w\" sizes=\"(max-width: 512px) 100vw, 512px\"\/><\/p>\n<p><em>Source: Bloomberg<\/em><\/p>\n<p>Increased availability of Venezuelan crude is, however, likely to take a toll on demand for Canadian crude, Mexican Maya, and Middle Eastern grades. The U.S. still buys 80% of Canada\u2019s crude output, despite the recent TMX expansion improving access to Asia. This helps to keep <a href=\"https:\/\/oilprice.com\/oil-price-charts\/#prices\" target=\"_blank\" rel=\"nofollow\">WCS (Western Canadian Select) prices<\/a> tied to U.S. refinery demand and alternative heavy grades. On the other hand, more Venezuelan flows are likely to benefit Mid-continent and West Coast refiners, including <strong>British Petroleum<\/strong> (NYSE:BP) and <strong>HF Sinclair <\/strong>(NYSE:DINO), thanks to greater WCS discounts if Gulf Coast demand is displaced.<\/p>\n<p>That said, Venezuela\u2019s low-hanging fruit is rather limited: According to Norwegian energy consultancy Rystad Energy, only 300-350 kbpd can be quickly restored with minimal spending from the current clip of 800,000 bpd-1 million bpd, with production beyond 1.4 mbpd requiring heavy, sustained investment.<\/p>\n<p>Rystad estimates that Venezuela will require $53 billion over the next 15 years just to keep production flat at 1.1 mbpd, but could need up to $183 billion over the same period to ramp up production to over 3 million bpd, roughly equivalent to the entire North American land capex for one year.<\/p>\n<p>Analysts at satellite intelligence company Kayrros have described Venezuela\u2019s energy infrastructure as being in a \u201ccatastrophic state\u201d following decades of under-investment, disrepair, and cannibalization of equipment.<\/p>\n<p>According to Kayrros, numerous oil storage tanks at the Bajo Grande and Puerto Miranda terminals are out of order due to corrosion and a lack of maintenance. But this is an industrywide problem: Kayrros estimates that roughly a third of Venezuela\u2019s storage capacity is currently inactive, reflecting unusable storage tanks, reduced refinery operating rates, and declining oil production. Meanwhile, operations at the large interconnected Amuay and Card\u00f3n refineries are running below 20% of capacity, essentially turning them into \u201cde facto storage centres\u201d according to the experts.<\/p>\n<p>Not surprisingly, Venezuela\u2019s pipeline network is in a similar state of disrepair: A leaked document from PDVSA in 2021 revealed that the country\u2019s oil pipelines had not been updated in 50 years, with Venezuela\u2019s National Oil Company estimating it would take a staggering $58 billion to get them back in peak condition. Recent estimates have placed the figure<a href=\"https:\/\/www.ft.com\/content\/b6d029d3-51cd-4cb5-9173-c24bae327daf\" target=\"_blank\" rel=\"noopener nofollow\"> in excess of $100 billion<\/a>. Venezuela\u2019s operational oil pipeline network has a total length of 2,139 miles (approximately 3,442 kilometers). For some perspective, the UAE, which produces approximately 3.2 million bpd, has ~9,000 km of oil pipeline.<\/p>\n<div class=\"printfriendly pf-alignleft\"><a href=\"#\" rel=\"nofollow\" onclick=\"window.print(); return false;\" title=\"Printer Friendly, PDF &amp; Email\"><img decoding=\"async\" style=\"border:none;-webkit-box-shadow:none; -moz-box-shadow: none; box-shadow:none; padding:0; margin:0\" src=\"https:\/\/cdn.printfriendly.com\/buttons\/print-button-gray.png\" alt=\"Print Friendly, PDF &amp; Email\"\/><\/a><\/div>\n<\/div>\n<p><script async src=\"\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><br \/>\n<br \/><br \/>\n<br \/><a href=\"https:\/\/www.nakedcapitalism.com\/2026\/01\/venezuelan-oil-and-the-limits-of-u-s-refining-capacity.html\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Yves here. Many commentators have described the sorry state of Venezuela\u2019s oil industry and taken a stab estimating what it would take to turn that<\/p>\n","protected":false},"author":1,"featured_media":104604,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[153,183],"tags":[],"class_list":["post-104603","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","category-spotlight"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/neclink.com\/index.php\/wp-json\/wp\/v2\/posts\/104603","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/neclink.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/neclink.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/neclink.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/neclink.com\/index.php\/wp-json\/wp\/v2\/comments?post=104603"}],"version-history":[{"count":0,"href":"https:\/\/neclink.com\/index.php\/wp-json\/wp\/v2\/posts\/104603\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/neclink.com\/index.php\/wp-json\/wp\/v2\/media\/104604"}],"wp:attachment":[{"href":"https:\/\/neclink.com\/index.php\/wp-json\/wp\/v2\/media?parent=104603"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/neclink.com\/index.php\/wp-json\/wp\/v2\/categories?post=104603"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/neclink.com\/index.php\/wp-json\/wp\/v2\/tags?post=104603"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}