More oil production in Venezuela could hurt Canada’s oil sector

Regime change in Venezuela could 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 grow for several years.

The Canadian sector has performed well better than expected Even amid persistent commodity prices last year. Production continues to increase as oilsands facilities expand their operations.

But shares of the Canadian energy company fell Monday morning after the U.S. ousted Venezuela’s Nicolas Maduro. With Washington’s involvement in Venezuela there is speculation that the country’s industry could undergo a renaissance – and experts say Venezuela’s increased production could hurt Canadian industry in the long run.

Commodity Context oil analyst Rory Johnston says the challenge will be to attract big investment dollars from US companies – no small feat given the “significant” amount needed to fix Venezuela’s broken oil industry. And the same companies have gone bankrupt before after investing in the South American country.

world’s largest store

Venezuela has the world’s largest oil reserves and pumps the same type of crude that is produced primarily in western Canada – heavy oil.

In the short term, more oil from Venezuela could be exported to the US Gulf Coast rather than to other foreign markets. In the long term, if US President Donald Trump’s wishes are fulfilled and more US companies start operating in Venezuela, the country has the potential to extract much more heavy oil from the ground.

Venezuela has done this before also. Production peaked at about 3.7 million barrels per day in 1970. Since then, various sanctions and failed government policies have reduced investment and output averaged just 900,000 barrels per day last year.

Meanwhile, Canada produces about five million barrels per day – vast majority which is exported to America

Venezuela’s withdrawal could pose a threat to Alberta’s oil-dependent economy, although it would likely take several years.

“It’s going to take a lot of money and a lot of things to do right to get that (Venezuelan) oil out of the ground,” said Al Salazar, a Calgary-based oil and gas analyst at Enverus Intelligence Research.

Most importantly, the country needs a “stable government”.

Speaking to CBC Radio, Richard Mason, former CEO of the Alberta Petroleum Marketing Commission and executive fellow at the University of Calgary, said Venezuela is “not like Saudi Arabia where you can drill a lot of wells and oil comes out of the ground – it’s heavy, heavy oil.” calgary iopener,

the white house is push US oil executives to invest again in Venezuela. Still, those companies report to investors and boards of directors who may be hesitant to spend significant capital in Venezuela while the political situation remains so uncertain, Mason says.

And while Venezuelan oil can be a competitive alternative to refineries in the U.S. Gulf Coast, the bulk of Canadian exports are sent directly to refineries in the Midwest.

Due to the proximity of the landlocked Midwest and the existing pipeline network between the two countries, the Canadian market is largely closed.

“The oil that is refined and used in the Midwest will be very difficult to access for Venezuelan oil,” Gitane da Silva, former CEO of the Canada Energy Regulator, said Monday, speaking to CBC News Network.

It would also be difficult to displace Canadian exports to Washington State and California due to the long transportation route from Venezuela.

china factor

The US is Venezuela’s second largest customer for crude oil. Most of the country’s crude oil is sold to China. deeply discounted pricesAnd it seems unlikely that Trump will allow that situation to continue.

If the US succeeds in redirecting Venezuelan oil to the Gulf Coast, China will likely need to find barrels from another country.

Canada could fill that gap, and is already increasing its crude oil exports to Asia following the expansion of the Trans Mountain pipeline between Edmonton and the Vancouver area.

Mason of the University of Calgary says this could support the case for another pipeline to the West Coast – or, at least, further improve 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.

Although the situation in Venezuela will not have much impact on the Canadian oil crisis in the near future, it is an unfortunate start to the year for an industry dealing with its consequences. Layoffs and continued low prices,

Canada’s oil production remains at record levels, but political turmoil is a variable that always affects – or drives up – oil prices, and that’s unlikely to change in 2026.