Venezuela seems to be a relatively consistent fixture in the mainstream media. While many of us know that Venezuela contributes a significant volume of its oil to keep North America's economy churning, very few have an understanding of just how important Venezuelan oil is to the world.
Venezuela has been producing oil since 1914 when its first commercial oil well was drilled on the eastern shores of Lake Maracaibo. The country was one of the five founding members of OPEC in September 1960 along with Iran, Iraq, Saudi Arabia and Kuwait.
Here is a map showing Venezuela's oil infrastructure:
Oil revenues are an extremely important contributor to Venezuela's economy. In 2012, the total value of all exports from Venezuela was $92.6 billion with $88.13 billion or 94 percent coming from the export of oil. Oil revenues contribute more than 50 percent of all budget revenues and around 30 percent of the nation's entire GDP. That is largely why the low oil prices of the mid-1980s and early 1990s had such a massive negative impact on Venezuela's economy.
According to the U.S. Energy Information Administration (EIA), Venezuela is the largest exporter of crude oil in the Western Hemisphere and has some of the largest oil and natural gas reserves in the world. Here is a look at Venezuela's oil reserves compared to their fellow OPEC members and comparing OPECs's reserves to those of the rest of the world:
You will notice that Venezuela has 24.8 percent of the total oil reserves controlled by OPEC, having 12 percent or 32.2 billion barrels more proven oil reserves than Saudi Arabia. As well, Venezuela's proven oil reserves are larger than those controlled by the world's non-OPEC nations. This factor alone, makes Venezuela a very powerful nation.
Here is a bar graph showing comparing Venezuela's proven oil reserves and production rate to those of Canada and the United States:
A major upward revision in Venezuela's proven oil reserves took place in 2010, nearly doubling the reserves from 99.4 billion barrels to 211 billion barrels, largely because of the inclusion of massive reserves of extra-heavy oil in Venezuela's Orinoco belt. Further upward revisions could take place if reserves from the entire Magna Reserva project are included, bringing the total to 311 billion barrels.
In 2010, Venezuela had net oil exports of 1.7 million BOPD, the eighth largest in the world. Here is a graph that puts Venezuela's total daily liquids production in 2012 into context:
You will notice that while Venezuela has the largest reserves in the world, it trails Saudi Arabia's production levels by a very wide margin. Crude production in 2011 increased by 100,000 BOPD to 1.8 million BOPD, equal to 2009 levels, however, overall production has declined by roughly 25 percent since 2001. Here is a graph showing Venezuela's oil production history since 1979:
This production decline is largely related to natural declines at older oil fields, maintenance problems and the need for investment by foreign oil companies, an issue that Venezuela has struggled with its oil industry was nationalized in the 1970s. As well, tax and royalty rate increases by the Chavez government has functioned to discourage foreign investment, particularly when the state-owned PdVSA was mandated a minimum 60 percent share in all projects.
Here is a map showing Venezuela's Orinoco heavy oil belt:
Here is a list of existing and planned Orinoco Belt projects:
In total, these projects are expected to add more than 2 million BOPD of production by the end of the decade. This is still relatively small when compared to Saudi Arabia's current production levels but will stand the country in good stead over the long-term.
Now that we have some background, here are two graphs that show how significant Venezuela's oil exports are to the United States:
As you can see, Venezuela is currently the United States' fourth largest supplier of imported crude oil after Canada, Mexico and Saudi Arabia. In 2011, the U.S. imported 951,000 BOPD from Venezuela, 8.3 percent of all American imports. That said, the importance of Venezuelan crude imports has declined from its peak in the mid-1990s.
Here is a pie chart showing how important Venezuela's oil exports are to the world:
China has become an increasingly important market for Venezuelan crude. In 2005, China imported only 19,000 BOPD from Venezuela; this increased to 230,000 BOPD in 2011.
At this point, Venezuelan crude is not as critical to the American economy as it was in the 1990s, particularly as domestic supplies of non-conventional crude increase (think fracing and Canada's oil sands). What is key to note, however, is the fact that Venezuela has the world's largest reserves of oil and is currently producing it at a fraction of the rate that Saudi Arabia is producing their reserves. Over the long-term, this means that as Saudi Arabia oil reserves and production rates begin to dwindle as surely they will, Venezuela will become a key part of the world's oil-based economy.