Throughout much of the developed world, there is a consensus that concern over climate change is leading to a rapid downturn in petroleum use and that petroleum will likely have a rapidly declining role in the world’s energy mix over the next 30 years. However, a rapid energy transition to a world no longer reliant on fossil fuels represents a formidable challenge and a high likelihood remains, especially in the developing world, that petroleum’s important and large contribution to the world energy mix will not be so easily displaced. Recent EIA forecasts show that world oil and gas demand has reverted to trend. Supply requirements for the end of 2022 are likely to exceed 100 million barrels/day, a remarkable recovery from a decline in liquids demands of over 15 million barrels a day in 2020 from the Covid-19 pandemic. Although Venezuelan oil production has been constrained by both technical mismanagement and sanctions, the size of its reserve base documents its potentially important role in meeting future world oil demand.

The timing of Venezuela’s petroleum future depends on whether it can enter the world oil market under traditional commercial conditions. On June 25, 2021, the U.S., Canada, and the E.U. issued a joint communiqué that made clear that a decision regarding the timing and specifics of the sanctions on Venezuela remains the primary determining factor on when and if Venezuela can play a larger role in the world oil market.

Even if Venezuela were somehow to find its way free of sanctions, the road back to higher production will require massive capital investment. Venezuela, which produced over 3 million barrels in day in the 1970s, is now at only 600,000 barrels per day. The authors estimate that the level of investment and amount of time required to rehabilitate the production potential of Venezuela would approach $30 billion USD in two stages:

Stage 1 – Pre-sanctions recovery: An investment of $7-9 billion over 2-3 years to get back to production prevalent before sanctions started in 2017 (about 2 million barrels/day).

Stage 2 – Post-recovery: An investment of an additional $20 billion/year for 2-3 years. These investments would take 4-5 years to yield additional production. This would require investment into offshore and underdeveloped onshore projects to bring them up to full production capacity. With proper investment, Venezuela can sustain a production output of approximately 2.5 million b/d over the next 20-30 years.

The authors provide an overview of Venezuela’s production potential, and evaluate the technical obstacles that must be addressed to restore Venezuelan oil production. Their paper can be found here.

Photo: Panelists for the Session on Energy Implications of the new U.S. Mexico Canada (USMCA) Trade Agreement (Left to Right) Jesus Seade Kuri (Key NAFTA Negotiator for the Administration of President Andrés Manuel López Obrador), Ildefonso Guajardo (Former Minister of Economy and Chief Negotiator of NAFTA), Carlos Pascual (Senior Vice President, Global Energy, IHS Markit), Herman Franssen (Panel Chairman, Executive Director,  Energy Intelligence Group), Lucian Pugliaresi (President, Energy Policy Research Foundation), Moisés R. Kalach Balas (Coordinator of the Strategic International Business Council, Consejo Coordinador Empresarial)   Lucian Pugliaresi made two presentations in Mexico City at the Energy Mexico Oil Gas Power 2019 Expo & Congress, a key event for the entire value chain of the Mexican energy sector.  He made presentations on a panel discussion on the new U.S. – Mexico – Canada (USMCA) trade agreement as well as a panel evaluating the implications of shifts in national energy policies.  His two presentations can be found here and here.    

The Institute of Energy Economics Japan (IEEJ) and EPRINC have published a follow-on assessment to their 2017 joint report on the future role of liquefied natural gas (LNG) in Asian power and fuel markets. This second year of our joint effort has taken a more in-depth evaluation of trends and longer-term uncertainties in Asian natural gas markets and the potential role of U.S. LNG exports in serving those markets. The joint research findings were presented at the 7^th Annual Producer Consumer LNG Conference held in Nagoya, Japan on October 22, 2018. The event was attended by energy ministers, government officials, and industry representatives from the entire LNG value chain.

A copy of the 2018 joint report can be found here.

Non-resident fellow Emily Medina has produced a report on Mexico as part of the Energy Policy Research Foundation’s multi-year research program evaluating the scale and scope of the North American petroleum renaissance. As U.S. producers expand production to meet domestic requirements and the rapidly growing market for pipeline exports and Liquefied Natural Gas (LNG), it is essential that policy makers have a full understanding of the sustainability of the U.S. natural gas production platform. The report covers the characteristics of the Mexican market for that natural gas as well as the challenges and opportunities that Mexico’s evolving energy sector faces as it reacts to current market trends. Emily’s report can be found here.