Trade Zone: Can Venezuelan oil displace the oilsands? 

U.S. President Donald Trump put Canada “on notice” with a Venezuela pivot and plan to take control of a portion of the South American country’s oil reserves. 

But can Venezuela realistically displace the oilsands? 

The heavy oil fight

Why is heavy oil so important to the U.S.?: The U.S. cannot easily replace Canadian supply: domestic production is overwhelmingly light, and heavy-crude alternatives from Mexico and Venezuela have structurally declined. 

The Venezuelan-Canadian heavy oil rivalry is not new. The two were vying for space in U.S. refineries in the 1990s and early 2000s —but that hasn’t been the case for years. Heavy crude exports from Venezuela to the U.S. has plummeted from more than 1.5 million barrels per day (bpd) in 2000 to negligible levels in recent years. However, since Washington’s toppling of Nicolas Maduro’s regime, Venezuelan crude has pushed back up, hitting  630,000 bpd in June. In contrast, Canada exported more than four-million bpd to the U.S. that month—and it remains the U.S.’s biggest source of imported crude.

The cost of boosting production in Venezuela would be staggering. It would require billions in investment over a decade, in part due to the mismanagement of infrastructure and assets in Venezuela from the mid-2000s onward, as well as the aging of many of the country’s most prolific fields, according to the RBC Commodity Strategy Team.   

A Venezuelan oil comeback “would likely be slow, expensive and politically fragile,.” wrote Shaz Merwat, RBC Thought Leadership Energy Policy Lead in a note late last year. 

Most companies are wary of returning to Venezuela—for now. Companies that previously operated in Venezuela have hesitated due to concerns including debt recovery stemming from the sanctions era. ExxonMobil and ConocoPhillips have held off returning to Venezuela after losing billions of dollars’ worth of assets in state expropriations.  

But some have jumped in. U.S. firm Chevron and Italy’s Eni are the first to return after Trump’s announcement. Chevron’s US$7 billion investment plan over the next five years could more than double its production in Venezuela to 600,000 barrels per day. 

The heavy oil fight will be more intense in the next few years. Venezuela’s supply could rise by 110,000 bpd in 2026 and another 245,000 bpd in 2027, according to the RBC commodity strategy team. With the U.S. claim that it controls 65 billion barrels of proven oil reserves in Venezuela, there’s potential for more, assuming the plan could survive legal and contractual challenges in Venezuela and the U.S., and political shifts in both countries.   

What does it mean for Canada? Canadian oil firms pumped out a record 5.35 million barrels per day in crude oil production last year, and have largely shrugged off U.S. efforts to resurrect Venezuela’s oil industry. The country’s top energy stocks have continued to rise amid higher oil prices.  

Canadian oil and gas industry is attracting U.S. and global attention. In recent weeks, firms like KKR, Apollo and Northern Oil and Gas have invested in the Canadian industry. LNG Canada’s Phase 2 project—a joint venture comprised of five global energy companies including oil major Shell—is now with the government’s Major Projects Office (MPO) for streamlined approval. 

Canada is looking to Asia. Efforts are also underway to help Canada diversify if Venezuela boost productions in a more meaningful way. The proposed West Coast Pipeline will bring one million bpd from Alberta to B.C., targetting Asia. Regardless of how U.S. policy evolves, Canadian producers are positioning themselves to secure diversified market access and greater resilience, amid the rising competition.  

The week that was

Canada and the U.S. traded barbs: U.S. Treasury Secretary Scott Bessent said his country was “not at war” with Canada, mocking the threat it could pose with “submarines from the Edmonton mall.” Prime Minister Mark Carney said Americans should “stop doing memes, stop throwing shade, stop trying to be tough and start being serious.”  

Republicans backed Trump’s trade war: Republican members of Congress met with U.S. Trade Representative Jamieson Greer this week, and generally expressed support for the president’s trade strategy, blaming Carney for walking away from negotiations.  

Global finance ministers and central bankers met at the G20: China was the lone country that rejected parts of a joint statement that was released following the summit, including a paragraph that said countries would “take steps to eliminate non-market policies and practices.”  

The Canada Investment Summit draws near, as trade tensions with U.S. loom: Carney and top Canadian CEOs plan to showcase energy, critical minerals, defence and advanced technologies at the investment summit, according to a report.