Oil production began in Venezuela in 1914 with the drilling of the Zumaque Well in Mene Grande, Zulia State, in the central-western part of the country, facing the Caribbean Sea and bordering Colombia. However, concessions to foreign companies began in 1922. The country’s technological and industrial development was rapid, transforming an agricultural country into a global hydrocarbon gem.
By 1929, the country was already the world’s second-largest producer and largest exporter, surpassing the United States in both cases. This rapid pace gained momentum in 1960, in the early years of the democracy in which Hugo Chávez was elected 39 years later, when Venezuelan politician Juan Pablo Pérez Alfonzo, “the unlikely father of Arab power” as The New York Times called him, promoted the creation of the Organization of Petroleum Exporting Countries (OPEC).
After several decrees handing over assets and equipment from concessionaires to the Republic of Venezuela, on January 1, 1976, President Carlos Andrés Pérez officially nationalized iron and oil.
Likewise, Petróleos de Venezuela, S.A., PDVSA, was created for the extraction, refining, distribution, and marketing of oil, and the concessionaires received approximately one billion dollars in compensation.
In 1992, Pérez returned to power to overcome two coup attempts by rebellious military officers, including then-Lieutenant Hugo Chávez. During his second term in Miraflores, Pérez promoted a series of economic and political measures to liberalize prices, together with a cabinet of technocrats, part of the so-called Chicago Boys.
The decision to raise the price of gasoline, historically the cheapest in the world and practically free, with the consequent rise in the price of public transportation, led to widespread demonstrations, including looting known as El Caracazo, which were suppressed with extreme violence, resulting in between tens and hundreds of deaths, according to various sources.
Many analysts and historians describe El Caracazo as the seed of Chavismo, due to the coordinating role played by left-wing subversive organizations in response to public discontent. Among these was the Socialist League, of which Nicolás Maduro was a member. That organization was founded by Jorge Antonio Rodríguez, who died after being detained and tortured by state security forces, and who is the father of Jorge Rodríguez, president of the National Assembly, and Delcy Rodríguez, president in charge of Venezuela after Maduro’s capture on January 3, 2026.
Oil plays a predominant role in the country’s political and economic history, producing at least three scenarios of “Dutch disease.” In Venezuela, a 1936 editorial called “Sowing Oil” by Arturo Úslar Pietri is very famous, calling for the use of petrodollars to diversify the economy. This was never done, and therefore Pérez Alfonzo’s description of oil as “the devil’s excrement” is also famous, due to the immense amount of oil that was drowning everything, even a year before its nationalization.
The Caribbean country has barely developed its tourism industry or industrial park, nor has it invested in research and development, promoting huge subsidies for education, health, and public services. but this abundance of resources has also been tainted by embezzlement and corruption, which in the Chavez era led to scandals and internal political purges such as the PDVSA-Cripto case that sent the once powerful minister Tareck El Aissami and dozens of managers to prison, also accused of treason.
The greatness of PDVSA
When PDVSA was created in 1976, there were 333 oil wells in Venezuela. They produced 2.3 million barrels of oil per day, of which 984,000 were refined, occupying just 60% of installed capacity. Today, it has between 18,000 and 15,000 active oil wells, with a production capacity of between 20,000 and 30,000 barrels per day, equivalent to 60 years of 2 million barrels per day, as well as very long-term production potential.
This oil infrastructure, according to 2018 data, also includes between 3,000 and 4,000 kilometers of oil pipelines in 42 distribution systems, 16 shipping terminals, another 3,000 kilometers of gas pipelines (although PDVSA officially cites 12,000 kilometers), and 153 gas compression plants with more than 570 compressors, whose operational status is in doubt. In addition to six large refineries in the country.
So, in addition to the largest oil reserves, amounting to 300 billion barrels, the great potential today lies in the existing infrastructure, which is now dilapidated and abandoned, but which includes what was once the largest single source of gas flaring in the world.
This is not just a curious fact. The specialized website Global Gas Flaring Reduction Partnership (GGFR) reveals that, in 2024, 8.3 million cubic meters of natural gas were burned in Venezuela, making it the fifth largest in the world behind Russia, Iraq, the United States, and Iran, but with three of the ten largest gas flaring sites in the world.
But the total loss of methane gas through venting or leaks reaches 13 million cubic meters, a figure so immense that “it can be seen from space.” An article in Bloomberg Green warns that although wasted methane, which is 60 times more polluting than CO2, accounts for 25% of Venezuela’s production, the highest rate in the world, it could be worth $1.4 billion.
However, PDVSA has already overcome difficulties. In 1976, it inherited a depleted industry because concessionaires had abandoned drilling and maintenance, but it managed to revive itself based on its human capital. Later, during the “Apertura” of the 1990s, with the change in laws that allowed the return of foreign investment in so-called “strategic partnerships,” production exceeded 3.5 million barrels per day.
At that time, it also achieved internationalization, with assets and offices in Europe, the United States, and the Caribbean, as well as the purchase of refineries and CITGO, the largest network of gas stations and refineries in the United States, but which for years has been in danger of being auctioned off due to debts from international lawsuits lost over nationalizations ordered and not paid for by the Chávez government.
Despite the mass layoffs of workers in 2001, the expropriation of foreign companies, and the politicization of the company, which still has 135 former oil workers in prison for reporting irregularities at PDVSA, in December 2013 it was still producing 2.32 million barrels per day.
Today, the challenge is to increase production from the 830,000 barrels per day produced in December 2025.
Dutch disease, again?
Similarly, former Oil Minister Rafael Ramírez, now in exile and facing several corruption charges, says that US control of funds from oil sales is “irregular and unsustainable” because 90% of the nation’s revenue comes from oil, raising questions about how the state’s current expenses, such as payments to public employees, will be sustained.
This is confirmed by both the Observatory and Harvard University’s Atlas of Economic Complexity, which reveals how exports of crude oil and derivatives account for the largest share of the Venezuelan economy, even with the restrictions of the economic sanctions imposed by the US since 2017, which ironically remains the main recipient of these hydrocarbon imports.
Ramírez assures that there is knowledge and infrastructure for recovery, but estimates the number of wells at only 12,000. “If money enters the country and there are partners working with us, the industry will recover in a few years.” But he insists that uncertainty and the lack of clear rules scare away investment, which is why he calls for a transition with different political factors and respect for the sovereignty expressed in the Constitution.
Now the acting president is talking about $300 million that will flow through the Central Bank of Venezuela (BCV) to private banks. This injection is almost four times the amount of the last bank intervention, while the parallel or black market exchange rate continues to fall with each passing day.
She is doing so at almost the same time as announcing a new amendment to the Hydrocarbons Law to allow foreign investment without the state-owned PDVSA owning all the oil, with the announcement of the first sale of liquefied gas in history and the possibility of the return of oil companies, the US embassy, the IMF, and the World Bank, for the recovery of the electrical, health, housing, and education systems, presumably through sovereign funds and/or accounts administered by the United States, as a result of the sale of oil, gas, and derivatives.
Venezuela needs to diversify its industry, take advantage of its local ingenuity and geographical location, and move from being a mere exporter of raw materials and importer of products to becoming the long-awaited Land of Grace, characterized by inventiveness, innovation, and prosperity. This does not exclude the hydrocarbon industry, but it cannot stop there.
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