U.S Energy Information Administration Assessment of the Venezuelan Oil Industry.

In March of 2011 the U.S. Energy Information Administration issued an updated country analysis brief for the Venezuelan Oil industry. The brief goes into detail underlining some of the major events and trends that may shape the future of oil in the Venezuela and its place on the global market.

Some important aspects of the report are summarized as follows:

Venezuela has the largest proven oil reserves in Western Hemisphere and, in 2009, was the worlds 11 largest net oil exporter. While the country obviously benefits from such large amounts of oil, it has become increasingly difficult for Venezuela to bring it to market due to quality issues and limits to both its drilling technology and refining capabilities.

In the last year Venezuela has seen a drastic increase in proven oil reserves up to 211 billion barrels in 2011 from 99.4 billion barrels in 2010. However this increase has mostly been in the form of extra heavy sour crude which must be sent to specialized refineries to be made usable. The country also has had problems keeping up its production in general as many of its fields are very mature and require major investments to maintain current output. It is estimated that Petroleos de Venezuela S.A (PdVSA) must spend approximately 3 billion dollars a year in infrastructure adjustments and upgrades just to maintain current production levels.

In an attempt to preempt these issues, in the mid 90's Venezuela divided its largest extra heavy crude region of Orinoco into the management of four companies, all majority PdVSA owned, to convert the heavy crude to lighter sweeter crude. While the efforts have been consistently held back by maintenance and safety issues, Venezuela expects the project to yield an additional 2,000,000 bbl/d of oil production by 2014.

Venezuela's petroleum exports have dropped precipitously since the mid 90's partly because of the above mentioned problems, and partly because the United States has decreased its level of imports from the country in recent history. Venezuela has has been trying to diversify its trading partners and has more than tripled its annual exports to China since 1995, but limits in the refining process, in which refineries found only in the Western hemisphere are specially built to handle extra heavy Venezuelan crude, have created difficulties in getting quality oil to other parts of the world. The United States and the Caribbean still make up its largest export destination by far.