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A regime change in Venezuela could both help that country regain its former prominence as an oil producer and pose a threat to Canada’s industry, which is producing record amounts of oil and is expected to continue to grow for several more years.
The Canadian sector has fared better than expected in the past year even amid persistently low commodity prices. Production continues to climb as oilsands facilities expand their operations.
But Canadian energy company stocks plunged on Monday morning, following the ouster of Venezuela’s Nicolás Maduro by the U.S. With Washington’s involvement in Venezuela there’s speculation that that country’s industry could undergo a renaissance — and experts say rising Venezuelan production could bruise the Canadian industry in the long run.
The challenge will be attracting major investment dollars from U.S. companies — no small feat considering the “monumental” amount required to fix Venezuela’s broken oil industry, says Commodity Context oil analyst Rory Johnston. And those very same companies have been burned before after investing in the South American country.
World’s largest reserves
Venezuela has the world’s largest reserves of oil and just happens to pump out the same type of crude that is mainly produced in Western Canada — heavy oil.
In the short term, more oil from Venezuela could be exported to the U.S. Gulf Coast instead of other foreign markets. In the long term, if U.S. President Donald Trump gets his wish and more U.S. companies begin operating in Venezuela, the country has the potential to pump much more heavy oil out of the ground.
Venezuela has done it before. Production peaked in 1970 at about 3.7 million barrels per day. Since then, various sanctions and failed government policies drove down investment and output averaged only around 900,000 barrels per day last year.
Canada, meanwhile, produces nearly five million barrels per day — the vast majority of which is exported to the U.S.
A comeback by Venezuela could pose a risk to Alberta’s oil-dependent economy, although that’s likely several years away.
“A lot of money and a lot of things have to go right to bring that [Venezuelan] oil out of the ground,” said Al Salazar, a Calgary-based oil and gas analyst with Enverus Intelligence Research.
Most important of all, the country needs a “stable government.”
WATCH | What’s needed to revive Venezuela’s oil industry:
Oil market analyst Rory Johnston on how U.S. strike on Venezuela could affect Canada’s energy sector
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Venezuela is “not like in Saudi Arabia where you can drill a bunch of wells and the oil comes out of the ground — this is heavy, heavy oil,” said Richard Masson, former CEO of the Alberta Petroleum Marketing Commission and executive fellow with the University of Calgary, speaking to CBC Radio’s The Calgary Eyeopener.
The White House is pushing U.S. oil executives to reinvest in Venezuela. Still, those companies report to investors and boards of directors who would likely be skittish about spending significant capital in Venezuela while the political situation remains so uncertain, says Masson.
And while Venezuelan oil could be a competitive choice for refiners in the U.S. Gulf Coast, the bulk of Canadian exports are shipped directly to refineries in the Midwest.
Canada has that market pretty locked up, thanks to the proximity of the land-locked Midwest and the existing pipeline network between the two countries.
“The oil that’s refined and used in the Midwest, that would be much harder for Venezuelan oil to reach,” said Gitane da Silva, former CEO of the Canada Energy Regulator, speaking to CBC News Network on Monday.
Canadian exports to Washington state and California would also be difficult to displace because of the lengthy transportation route from Venezuela.
The China factor
The U.S. is Venezuela’s second-largest customer for crude oil. Most of the country’s crude is sold to China at heavily discounted prices, and it seems unlikely Trump will allow that situation to continue.
If the U.S. does succeed in redirecting Venezuelan oil toward the Gulf Coast, China would presumably need to find barrels from another country.
Canada could fill that gap, and has already been ramping up its crude oil exports to Asia following the expansion of the Trans Mountain pipeline, between Edmonton and the Vancouver area.
Masson, with the University of Calgary, says this could support the case for another pipeline to the West Coast — or, at least, further improvements to the existing pipeline system.
On Monday, Alberta Premier Danielle Smith emphasized that point, describing the urgency of building oil pipelines to export Canadian oil to new markets.
While the situation in Venezuela may not have much of an impact for the Canadian oilpatch in the near term, it marks an unlucky start to the year for an industry dealing with the aftermath of layoffs and persistently low prices.
Canada’s oil production remains at record levels, but political turmoil is a variable that always weighs on — or boosts — oil prices, and that’s unlikely to change in 2026.
