Venezuela’s oil recovery: A long and daunting road

7 January 2026

Traders are closely watching for the potential impact of regime change on Venezuela’s oil production, reflecting hopes for a swift upswing—after all, the country has roughly 300 billion barrels of proven oil reserves.

However, excitement about a rapid rebound in Venezuelan oil output risks putting the cart before the horse.

Even with Maduro gone, the path to recovery will be uneven. Even if the 30-50 mb of Venezuelan oil flows to the US under the directive of President Trump, potentially at the expense of China, reducing the downside risk to near-term production and exports, the country still has to navigate a period of political uncertainty which has implications for the medium term. Overall production and balances are unlikely to shift materially any time soon even if trade flows do.

US blockade and sanctions remain in place for now

For now, the Trump administration plans to keep oil sanctions and a blockade in place as leverage against Venezuela’s remaining political and military leadership. But lifting the blockade or allowing flows to the US would only allow Venezuelan crude production to return to its previous 1.1 mb/d level. If Trump is satisfied with how Venezuela acts over the next few weeks or months, he may start to reshape oil sanctions. A package of waivers and continued enforcement against the shadow fleet could create a toolkit to redirect Venezuelan oil flows and maintain US leverage.

The US military strikes did not damage any oil infrastructure. But Petróleos de Venezuela (PDVSA) started to shut in around 0.2 mb/d of crude production in the Orinoco Belt on 28 December due to storage constraints. Sustained reductions in diluent imports will also impede production.

Restoring Venezuelan upstream infrastructure is a massive task

Any recovery in Venezuelan crude production will be a slow grind rather than a sudden rush.

We estimate easing sanctions (as described above) are only likely to result in output rising by 0.2 mb/d versus 2025 average levels by 2027 to 1.3 mb/d, as most of the easy gains have already been achieved since Chevron resumed operations in late 2022.

A more substantial recovery that raises Venezuelan crude production above 2 mb/d would require many years and tens of billions of dollars, and it would still face significant obstacles. Even if the political environment stabilises, we would expect a piecemeal recovery in which foreign companies opt to rehabilitate or develop only those projects that require limited investment. This would result in few new capacity additions and, given natural declines, Venezuelan output would remain below 1.5 mb/d when Trump leaves office in 2029.

There are many brownfield opportunities that firms will consider before greenfield developments. But even these projects will face issues from existing infrastructure, which is heavily dilapidated after years of inadequate maintenance and theft. Gas compressors, power supply, wells, upgraders and terminals all need expensive remediation or complete replacement.

Restoring electricity supply requires repair of hydroelectric dams, transmission infrastructure and thermal power plants, as well as restructuring of natural gas pricing mechanisms.

Investor confidence will be slow to recover

PDVSA lacks the capacity to coordinate the investment and activities required for a sectorwide overhaul, especially if its leadership undergoes a major shake-up to remove some Chavistas as part of a wider political transition. Oil firms would need to play a major role, but they will be cautious about committing substantial amounts of capital.

Potential investors will also be concerned about the durability of upstream contracts issued under US pressure and the risk of claims from companies whose assets were expropriated or creditors holding Venezuelan or PDVSA bonds. Venezuela’s total external debts are estimated to be around $150–170 billion.

These political and legal risks will be factored into commercial investment decisions, especially by the large oil companies that Trump is pushing to take the lead. These firms may opt to slow-walk investment commitments, rather than risk political backlash by openly rejecting Trump’s wishes.