After Hugo Ch谩vez, what's next for Venezuelan oil?
Hugo Ch谩vez's passing offers new promise for developing the world's largest聽oil reserves, but most聽analysts expect that change will come slowly, if at all.
Production at the state-owned oil company Petr贸leos de Venezuela SA (PDVSA)聽dropped by a quarter under Mr. Ch谩vez, and some speculate the Venezuelan leader's passing will usher in an era of stability for the country's national oil company.
"The oil industry has been waiting patiently for Chavez to die with the hope that whoever came next would be more interested in building value rather than destroying it," notes .
The potential value is enormous. Venezuela's聽Orinoco Belt holds the world's second largest reserve of tar sands (also known as oil sands) after Canada. Adding in its conventional oil, Venezuela has聽296.5 billion barrels of oil reserves, the largest in the world, according to BP's 2012 Statistical Review of World Energy. No. 2 Saudi Arabia has聽265.4 billion barrels in reserve.
Venezuela plans eventually to produce an additional 2 million barrels per day courtesy of more than $80 billion in investments.聽
But mismanagement plagued PDVSA during Ch谩vez's reign, stifling production. And nationalization of the oil industry and other political moves scared off many foreign investors. Oil giants like聽Exxon Mobil Corp. and ConocoPhillips left the country. Others won for contracts but were hesitant to put in the large investments neces, but Ch谩vez's passing may once again catch the attention of the oil supermajors.
鈥淸PDVSA] really is disrespected today because of corruption, cronyism, incompetence and it鈥檚 just doing a terrible job for the people of Venezuela,鈥� John Hofmeister, former president of Royal Dutch Shell's US unit, told Wednesday. 鈥淭hey鈥檝e got a long way to come back. Let鈥檚 hope they can come back, because otherwise it鈥檚 gonna get worse before it gets better.鈥�
Despite being the聽fourth-largest oil exporter to the United States, Venezuela's role in the global oil market has diminished over the years. The boom in tight oil production from shale may soften the impact of any price uncertainty associated with the end of the Ch谩vez era.
"Venezuela is a weak OPEC hawk, as it has no sufficient production to influence prices," Gustavo Coronel, a founding member of the board of state-oil firm PDVSA, told Tuesday. "Venezuela is no longer a factor that can really upset the markets as was the case 20 years ago."
