Why U.S. oil refiners could be the big winners in Venezuela - even if its actual reserves disappoint

By Myra P. Saefong Refiners in the U.S. have the distinctive ability to handle the type of heavy crude that Venezuela claims to have in abundance Venezuela's crude is very heavy, and requires more complex pumping and upgrading systems - which U.S. Gulf Coast refiners are already configured for. A lot of people have suggested that President Donald Trump got involved with Venezuela because it's home to the world's largest proven crude-oil reserves. That might - or might not - end up being the case once more light is shined on Venezuela's own oil-reserve estimates. But the not-so-obvious benefit of U.S. involvement in running the country might come from the distinctive ability of American refineries to handle the type of oil that Venezuela claims to have in abundance. Read Barron's: How much oil does Venezuela really have? For Chevron, the truth matters. Venezuela's crude is very heavy, and requires more complex pumping and upgrading systems - "all of which raise costs," said Rebecca Babin, senior energy trader and managing director at CIBC Private Wealth. "Strategically, however, these barrels would be well suited for U.S. Gulf Coast refiners configured for heavy crude and could ease some reliance on Canadian supplies," she told MarketWatch. "That's an angle refiners are paying close attention to." When asked for comment, the White House referred to Saturday's press conference following the arrest of President Nicolás Maduro. Trump said at the time that Maduro was indicted for his campaign of deadly narco-terrorism against the United States. Read: Spending over $100 billion to rebuild Venezuela's oil industry won't be the biggest obstacle facing U.S. oil companies It's hard to ignore that U.S. oil refiners already have an advantage when it comes to their ability to refine the heavy crude that makes up most of Venezuela's oil reserves. It also can be highly profitable for refiners to handle. "Heavy, sour crude almost always trades at a discount" to light, sweet crude, said Mark Malek, chief investment officer at Siebert Financial. Heavy crude is highly viscous, and thick. But "if you can process it efficiently, that discount turns into profit," said Malek. That's what Gulf Coast refiners have been quietly doing for years. Companies like Valero Energy Corp. (VLO), Phillips 66 (PSX), Marathon Petroleum Corp. (MPC) and Chevron Corp. (CVX) have spent years "building and optimizing refineries designed to process Canadian heavy crude." Western Canadian Select crude is not chemically identical to Venezuelan crude, "but it rhymes. The equipment overlaps. The expertise transfers. The margin opportunity is familiar," he said. The price of Venezuelan crude isn't easy to track given the U.S.'s wide-sweeping sanctions imposed on its oil industry, with only sparse data available for the 2020s. Heavy crude based on the U.S. Free On Board costs of Venezuelan crude was quoted at $60.35 a barrel in 2024, according to the Energy Information Administration. It traded above $100 in 2012. Currently, heavy, sour crude is generally trading around the mid-$40 level, said Tom Kloza, chief oil analyst for Gulf Oil. That's "not exactly a stunning return," he told MarketWatch. Venezuela has a lot of that oil, with estimated proven oil reserves of 303 billion barrels, although that could prove to be problematic, said Kloza. There could be 300 billion barrels of crude, but only 100 billion barrels might be easily tapped, he said. The heavy crude price also pales in comparison with the widely-tracked benchmarks for light, sweet crudes. U.S. benchmark West Texas Intermediate crude (CL.1) traded below $58 a barrel on Tuesday after losing 20% in 2025. The global benchmark known as Brent (BRN00) traded above $60 on Tuesday, but lost over 18% last year to mark a third straight annual decline. A potential drawback, however, is that heavy crude does not flow easily and needs to be thinned out by blending it with light oils or solvents for processing. It's expensive to extract and there are significant upfront costs involved, said Simon Lack, portfolio manager of the Catalyst Energy Infrastructure Fund MLXAX. So, profitability for any oil companies willing to invest and help rebuild the infrastructure would "depend on the assurance of lengthy secure access to the resource," he said. Global availability of heavy crude was a bet the U.S. oil industry made years ago. Before the U.S. shale boom started around 2008, heavier crudes were more widely available on the global market so U.S. refineries were built to process them. Nearly 70% of U.S. refining capacity runs most efficiently with heavier crude, according to the American Fuel & Petrochemical Manufacturers. And using heavy crude can garner more profits versus light crude, said Norma Mozée, an independent energy and mining consultant. U.S. Gulf Coast refineries may benefit because they are equipped to deal with the special refining process needed for that heavy crude, said Mozée, who provides analysis and business development services for companies entering the Latin American market. At the same time, Venezuela's five refinery complexes are "in shambles," she said. They are operating at about 10% of nameplate capacity and, according to a Venezuela Hydrocarbon Association estimate, would require over $10 billion to bring them to 80% of capacity, she said. U.S. refiners in Texas and Louisiana have been the "beneficiaries" of the refining failures of state-owned Petróleos de Venezuela, S.A. (PDVSA) in the past 20 years, said Kloza of Gulf Oil. And for now, there are no hints of any efforts to resuscitate Venezuelan refining, he said. Kloza referred to Venezuela as the "hornets' nest" of Latin America. Given that, "oil companies aren't likely to risk staff, capital and equipment without assurances from the Trump administration." U.S. refiners, however, "have been the winners thanks to PDVSA's demise and they could see that edge increase if Western companies resurrect Venezuelan crude-oil production," Kloza said. -Myra P. Saefong This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal. (END) Dow Jones Newswires 01-06-26 1810ET