Expectation of large-scale arrival to the oil industry of Venezuela of the American companies gives a reason to consider various approaches to investments into oil and gas production. Venezuela has been producing oil for over 100 years, and during this time, it has pursued both a policy of maximum openness to foreign investors and a state monopoly in the oil industry. 

The government’s focus on the oil and gas industry in the world is due to the fact that oil and gas deposits are created not by entrepreneurs, but by nature. A person can only develop these fields with various indicators of efficiency. It is impossible to take 100% of geological stocks of the oil field from subsoil. By means of simple technologies it is possible to extract 10-20% of stocks, and due to use of the most advanced technologies the indicator of the oil recovery coefficient (ORC) manages to be brought to 70%.

The large international companies work in different countries and can attract the necessary amount of financing and the most advanced technologies. The question is: whether they will want to do it? If a company is not sure that it can operate in a particular country for a long time, it is likely to prefer to quickly extract the most easily accessible oil with minimal investment. Often it leads to the fact that the field is ruined and to take the stocks which remained in it becomes very difficult and expensive, and even is impossible.

It is clear that a state-owned company focuses on long-term operations and tries to extract as much oil as possible, but it may not have access to the best technologies. The governments of the countries of the West support the companies of the countries in the aspiration to get access to oil resources abroad and often impose sanctions against those countries which stake on own state oil and gas corporations.

In turn, officials like to deal with large state-owned companies in their countries. After all, they can be used to implement a variety of social projects, such as the construction of sports and cultural facilities, roads, housing, and the support of sports teams, among others. If you offer something like this to a private company, it will ask for tax incentives or other benefits in return. It is impossible to imagine that the private company undertook care of maintenance of memorial complexes the Eternal flame throughout Russia. Only the large state company can cope with it.

On the other hand, officials like to employ in state company their relatives and friends that leads to inflating of their states and decrease in overall performance of corporations. Naturally, private companies also have thug employees and those who work for them, but the scale of this problem is significantly smaller.

State companies, usually are messing with taxes less than private traders. Besides, state corporations transfer a part of profit into the budget as dividends. As a result many states seek to develop oil and gas fields in the territory by forces of joint ventures of the state and private companies. Private traders bring advanced technologies in the joint venture, and representatives of state company have to watch that taxes were paid in full and fields were not ruined.
If to return to Venezuela, it is worth understanding that when speak about huge oil resources of this country, the speech often goes about geological, but not about stocks, profitable for production. At the present prices it is not really favorable to extract heavy, high-viscosity and difficult-to-extract Venezuelan oil which is more like bitumen in terms of its properties. In order to transport such oil, it must be diluted with lighter grades. It is difficult to expect a long line of people willing to invest huge amounts of money in developing Venezuela’s reserves.

The head of the largest American oil and gas corporation ExxonMobil Darren Woods reminded that assets of the company in Venezuela already «were twice confiscated». Now, for the corporation’s new entry into Venezuela, it will require «quite significant changes,» reliable investment protection mechanisms, and reform of the country’s hydrocarbon legislation.

So far, only one American company, Chevron, is operating in Venezuela, and it plans to continue doing so. As for others, we can say that if they do come, they will try to work in fields where the infrastructure is already in place and where they can quickly extract as much oil as possible using advanced reservoir stimulation technologies. No one will invest huge amounts of money to create large-scale infrastructure for oil production and transportation, and no one will develop fields with the highest possible recovery factor, because there is no guarantee that American companies will be able to stay in the country for a long time. In turn the Russian state company Roszarubezhneft hopes to continue the work in Venezuela. There is nothing surprising in it. Venezuela is a major debtor of the Russian Federation. In turn, the USA tries to forbid Russia and China to trade in the Venezuelan oil.

Many consider that the USA began large-scale military intervention to Iraq for the sake of receiving control over oil reserves of this country. It is possible that the US leaders had such plans, only they could not be implemented. Currently, Iraqi oil is being extracted by companies from various countries, and the Americans are not dominating the market at all. Moreover, a considerable part of oil of Iraq is extracted by the Chinese companies. It turns out that American guys were dying so that the Chinese could develop Iraqi oil fields. It is absurd.

It is possible to provide a formula of the optimum organization of development of oil and gas fields in the conclusion. At first it needs to be offered to a state company in your country. If its management says that production on this concrete field is not profitable without granting tax benefits and preferences, then the project should be offered to a private company, if it also refuses, then to a foreign corporation.

The private companies often work more effectively than state, but their owners like to take out money abroad, and then to sell the companies to foreigners. In Russia, it is common to condemn wealthy people for exporting their capital. However such a trend is observed in many countries. It is no secret that there are countries with mild climate, comfortable for life, with the developed social infrastructure where rich men from around the world like to lodge. The foreign companies, by definition, are obliged to translate profit abroad to pay dividends to the shareholders.

Recently, there has been a lot of discussion about how the oil market will change if Venezuela significantly increases its production. It is clear that there may be a slight increase in production, but it is unlikely to be significant. According to Patrick Puyanne, the CEO of TotalEnergies, Venezuela will be able to increase its oil production by only 0.1-0.2 million barrels per day (bpd) in the near future.
According to Puyanne, it will take years for Venezuelan oil production to grow from its current level of less than 1 million barrels per day to the once-reached level of over 3 million barrels per day. Besides, investors need an accurate legal framework which creation is long process. According to the CEO of TotalEnergies the rapid growth is possible only on 100-200 thousand barrels per day whereas growth by 1 million barrels per day requires investments into 100 billion dollars.

Today, almost all experts agree that global oil consumption will continue to grow. Although it was recently said that in 2021, humanity reached the peak of oil consumption (97 million barrels per day) and it will continue to decline. However, by the end of 2025, the global daily oil consumption was around 105 million barrels.

At the end of the last year the International Power Agency changed the long-term forecast. Now specialists of the agency predict that global demand for oil and the liquefied natural gas (LNG) can grow till 2050 (earlier they predicted decrease in demand). The text notes that the scenario has been modified to take into account the current policies of countries that are either ignoring the transition to clean energy and their promises to achieve net-zero emissions by the middle of the century, or have not yet presented plans to achieve this. The IPA predicts that global energy demand will increase by 15%. According to the scenario, oil demand is expected to reach 113 million barrels per day by the middle of the century.

IPA also predicts that the world market of LNG will grow from about 560 billion cubic meters in 2024 to 880 billion cubic meters in 2035 and to 1,020 billion cubic meters in 2050. In turn the Forum of the export countries of gas predicts that demand for gas in the world will grow by 2050 by 32%, and the gas share in a world energy balance will rise from 23% to 26%. It is no secret that our country has the largest natural gas reserves in the world. The forecasts for increased demand for this energy resource are very encouraging.