OTC 2026: Venezuela tries to draw IOCs back as IEA calls for more CAPEX
(WO) - In a keynote presentation at OTC 2026 on Wednesday, May 6, non-resident Fellow of the Baker Institute at Rice University, Luis Pacheco, investigated the changes necessary to see Venezuela’s declining oil output reverse course. “A recovery of hydrocarbons is inextricably linked to a recovery of the economy,” he noted early on, “and a recovery of the economy would mean a recovery of the country.”
Looking purely at the numbers, it is plain that Venezuela still has substantial crude oil resources, even with recent upheavals and historic difficulties blunting that potential. The country holds an estimated 303 Bbbl of recoverable oil reserves—supposedly largest oil reserves in the world, surpassing even the Middle East’s substantial stores—in addition to a healthy 200 Tcf in gas reserves, as Pacheco pointed out.
Despite these natural resource advantages, the country has seen a steady decline in production numbers since the early 2000s that has shrunk output from around 3.0 MMbopd to today’s approximately 950,000 bopd. Pacheco outlined a number of economic and political reasons for the decline, the most critical of which includes chronic underinvestment from 2014 onwards, spurred in no small part by political interference in state-owned PDVSA’s operations, U.S. sanctions and the withdrawal of most IOCs.
That underinvestment has resulted in aging and degraded infrastructure, with over 1 Bcmd of excess gas being flared, due to lack of capacity, according to Pacheco. He added that as it stands, PDVSA’s current outstanding obligations sit at around $75 billion, making it clear that the company is in no position to tackle the issue of needed infrastructure investment.
Policy is the problem. Even so, Pacheco noted that the main hurdle is policy, not economics. Existing brownfield development costs are $7/bbl, while greenfield and exploratory development are close behind, at $11/bbl and $16/bbl, respectively. The country’s Organic Law on Hydrocarbons (LOH) saw a major amendment in 2026, with proposed changes that would be significantly more favorable to IOCs, compared with past years. According to Pacheco, some of these changes include allowing private companies to once again operate in the country, lowering of royalty rates with more room for negotiation, a halved tax rate, and removal of an additional windfall tax altogether.
These changes seem to indicate a shift away from NOCs and a return to enticing IOCs to operate within the country. While some majors remain cautious, the approach seems to be working, as evidenced by the granting in April of an increased stake in a JV to Chevron, as well as rights for another of the company’s JVs to develop an additional heavy oil field. The additional acreage consolidates the company’s position specifically in the unconventional Orinoco Belt, and the added production will be needed, as oil demand continues to rise.
In a later panel, DAMORPHE Chairman Kamel Ben-Naceur, emphasized the importance of that kind of reinvestment when looking to the industry’s future—particularly for oil. “I was told then, in 1980, that we would have 40 years of oil reserves [left],” he noted, adding that the IEA has largely stuck to the prediction of oil’s inevitable peak for the last two to three decades, with updates every few years on the definitive date, as time progressed and data changed. In 2025, however, the story changed. In a stark about-face from its 2021 prediction that the world no longer needed long-term projects for oil and gas—as well as its 2023 prediction that oil and gas would peak in demand in 2028—the IEA in 2025 urged more investment in upstream oil and gas.
Ben-Naceur attributed the sudden shift in IEA’s attitude at least in part to slower-than-expected adoption and invention of clean energies. Previously, IEA predicted that as cleaner renewable energies came on-line, demand for fossil fuels would drop in the 2020s. However, as the worldwide energy demand only continues to grow, the global response to the question of renewables or fossil fuels has been “all of the above.” That rising demand, coupled with years of CAPEX and OPEX conservatism, now presents the looming threat of an oil shortfall, if diminishing supplies are not replenished with new discoveries.
“We need those barrels—we need that investment to sustain oil demand,” Ben-Naceur emphasized, while also pointing out that, in contrast to oil exploration of the 1960s that averaged 90 Bbbl of discoveries per year, exploration from 2020 to 2024 showed an average of less than 20 Bbbl per year. Not only that, but time to first oil has also grown longer, exploration has gone down considerably, and the reinvestment ratio percentage has dropped.
Some positive attributes. Yet, it’s not all doom and gloom; current global reserve estimates sit at around 1.5 Tbbl to 1.85 Tbbl, and with current per-year demand, that provides around 45 to 55 years of supply, per Ben-Naceur. Still, he emphasized that a substantial shift in levels of CAPEX spending would be needed to avoid an oil shortfall in the future. “We should be getting back to the level we had in 2015…it needs to be 40% to 50% above today’s CAPEX levels.”
