Venezuela needs more oil investment to unleash vast reserves

The oil rich lands of Venezuela have helped the country occupy the top rank among countries with the most proven oil deposits. A closer look at Venezuela’s situation, however, has led others to state that the country will have to lure more firms into investing in oil exploration and advanced technology to unleash its oil deposits. Without these, it may be inappropriate at this time to refer to Venezuela as the country with the biggest oil reserves, according to Citigroup Global Markets Managing Director Ed Morse.

The country’s total oil reserves are approximately 296.5 billion barrels as of year-end 2011.  This is based on reports contained in the yearly Statistical Review of World Energy, which came out on Wednesday. This volume is 31.1 billion barrels more than Saudi Arabia’s oil reserve, amounting to 265.4 billion barrels.

Morse, who also served as a consultant to both the U.S. Energy and Defense Deptartments and the International Energy Agency, said the reserves, though sizeable, have very little impact.

What is really vital is how fast Venezuela can produce commercially viable oil from its reserves.  What’s deep beneath the ground remains invaluable if it cannot be extracted. In the absence of companies willing to make a sizable oil investment in new technology to develop the country’s reserves, the vast volumes of oil reserves don’t count for much.

Hugo Chavez, the country’s Head of State, is preparing to land a third-term as President.  Chavez committed to increase Venezuela’s oil output capacity by two-fold, and aims to achieve an oil output level of 6 million bpd in the long term via the Orinoco oil field. Elections in Venezuela will fall on October 7th of this year.

During his term as President, his government took control of the country’s steel, cement, and oil sectors – a very unpopular decision in the eyes of foreign investors. Under his rule, the local oil sector has performed poorly. PDVSA, Venezuela’s state-run oil firm obtained a mere 9 percent of the federal budget as part of the state’s efforts to invest in oil industry.