The High-Risk, High-Reward Potential of Venezuela's Oil Sector in a Trump-Backed Scenario

Venezuela's oil sector, long a symbol of both immense potential and systemic collapse, now stands at a crossroads under a Trump-backed geopolitical and economic overhaul. With the U.S. military's January 2026 capture of President Nicolás Maduro and the subsequent installation of interim leader Delcy Rodríguez, the country's energy landscape is being restructured to align with American strategic interests. For investors, this scenario presents a paradox: a market with the world's largest proven oil reserves and a production capacity that could theoretically surge to 3 million barrels per day, yet one plagued by infrastructure decay, political instability, and the lingering shadow of U.S. sanctions.

Production Capacity and the Path to Recovery

Venezuela's oil output in 2025 averaged approximately 900,000 b/d, a fraction of its 1970s peak of 3.7 million b/d. This decline stems from decades of mismanagement, underinvestment, and the U.S. sanctions regime, which slashed exports to less than 600,000 b/d by late 2025. Restoring production to even 1 million b/d would require $10–20 billion in initial investment and two to three years of operational turnaround, while full recovery to 3 million b/d would demand $100 billion over a decade. The Trump administration has signaled conditional support for such efforts, offering sanctions relief if Venezuela aligns its oil sector with U.S. corporate partners and excludes Chinese and Russian influence.

However, physical and financial hurdles remain daunting. Venezuela's heavy, sour crude requires costly diluents and advanced refining infrastructure, much of which has deteriorated due to years of neglect. Even with U.S. backing, analysts project a gradual recovery: 1 million b/d by mid-2026, 1.1–1.2 million b/d by 2027, and 1.7–1.8 million b/d by 2028-assuming sustained political stability and capital inflows.

Political Risk and U.S.-Backed Mitigation Strategies

The Trump administration's military intervention and subsequent control of Venezuela's oil exports have created a unique-if controversial-framework for foreign investment. By capturing Maduro and redirecting oil sales through U.S. channels, Washington has positioned itself as both a stabilizer and a gatekeeper. Treasury Secretary Scott Bessent has hinted at imminent sanctions relief to facilitate oil sales and unlock $5 billion in Venezuela's frozen IMF Special Drawing Rights (SDRs). These measures aim to incentivize U.S. firms like Chevron, ExxonMobil, and ConocoPhillips to re-enter the market, leveraging their historical expertise in Venezuela's Orinoco Belt and joint ventures with PDVSA.

Yet political risk remains acute. The U.S. military's intervention has drawn international condemnation as a violation of sovereignty, and Delcy Rodríguez's interim government has yet to demonstrate a commitment to legal reforms or investor protections. For U.S. companies, the Trump administration has offered verbal assurances of "total safety" and even potential reimbursement for infrastructure investments, but these promises lack formal contractual safeguards. Major firms have demanded concrete guarantees against expropriation and operational disruptions before committing capital.

Contractual Safeguards and Legal Challenges

Venezuela's legal environment further complicates investment. The country denounced the ICSID Convention in 2012, limiting access to international arbitration for new disputes. Additionally, U.S. sanctions have created a patchwork of compliance risks, with secondary penalties deterring non-American firms from engaging in Venezuelan oil deals. For instance, Chinese companies-once Venezuela's largest oil customers-now face disrupted supply chains and uncertain repayment terms for $60 billion in prior loans.

To mitigate these risks, U.S. investors may rely on bilateral investment treaties (BITs) like the China-Venezuela BIT or seek insurance through private political risk insurers. However, the Trump administration's direct involvement in oil sales and sanctions relief introduces an element of unpredictability. As one industry source notes, "The U.S. is acting as both a regulator and a partner, which creates a conflict of interest for investors seeking clarity."

Market Implications and Strategic Considerations

A surge in Venezuelan production could significantly impact global oil markets. If output reaches 1.5 million b/d by 2027, it could exacerbate an already oversupplied market, potentially pushing Brent prices below $55 per barrel in 2026. For U.S. firms, this presents a dual challenge: balancing the need for competitive pricing with the high costs of reviving Venezuela's infrastructure.

Strategically, the Trump administration's approach reflects a broader goal of countering Chinese and Russian influence in Latin America. By prioritizing U.S. corporate interests in Venezuela's oil sector, Washington aims to reassert its economic dominance in a region increasingly aligned with non-Western powers. However, this strategy hinges on Venezuela's ability to stabilize its political environment-a task that remains unproven.

Conclusion: Calculating the Risks

Venezuela's oil sector offers a tantalizing high-reward proposition for investors willing to navigate its high-risk environment. The Trump-backed scenario provides a unique window for U.S. firms to reclaim a stake in the world's largest oil reserves, but success depends on resolving infrastructure decay, securing legal protections, and maintaining political stability. For now, the sector remains a gamble-a bet on whether the U.S. can transform Venezuela's oil wealth into a sustainable economic engine without repeating the missteps of the past.