The United States’ bid to take control of Venezuela’s oil sector following the abduction of Venezuelan President Nicolás Maduro has put a spotlight on the type of crude oil the Latin American country has.
There are hundreds of types of crude oil produced in approximately 100 countries, each with different viscosity and sulfur content.
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Although all grades of crude oil are valuable, differences in their properties make certain grades of crude oil more popular in some markets than others.
What is the difference between “heavy” and “light” grade oils?
Crude oil is rated as “heavy” or “light” based on its viscosity or “specific gravity.”
Crude oil is also classified by its sulfur content, with those with high sulfur content being called “sour” and those with low sulfur content being “sweet.”
Heavy, sour grades are difficult and costly to refine into petroleum products such as gasoline, diesel, kerosene, and jet fuel.
Generally, the lighter and sweeter the crude oil, the higher the price.
Some countries or regions primarily produce certain grades.
For example, Canada primarily produces heavy, sour crude oil, while African varieties tend to be lighter and sweeter.
Popular light and sweet varieties include Arabian Super Light from Saudi Arabia, South Pars Condensate from Iran, Tapis Blend from Malaysia, and Cossack from Australia.
Among the most traded heavy and sour varieties are China’s Shenley, Britain’s Kraken, Iraq’s Basra Heavy, and Iran’s Soroush.
What type of oil does Venezuela have?
Venezuela has the world’s largest proven oil reserves, estimated at 303 billion barrels.
Most of these reserves consist of heavy sour crude oil located in the Orinoco oil region in the central part of the country.
The oil in this basin is particularly thick and vicious, with a tar-like consistency, requiring specialized methods such as steam injection and diluents to extract it.
Industry analysts say huge investments will be needed to unlock the basin’s true potential due to the deteriorating state of the industry’s infrastructure and knowledge base following the nationalization of the industry by late leader Hugo Chávez and years of U.S. sanctions that have prevented Venezuela from accessing foreign capital and modern technology.
The Latin American country’s production was estimated at around 860,000 barrels per day (bpd) as of November, less than 1% of the world’s total and down significantly from a peak of around 3.5 million barrels per day in the 1970s.
Rystad Energy, a consulting firm based in Oslo, Norway, estimates that about $110 billion in capital investment would be needed to bring the country’s production back to the roughly 2 million barrels per day of the late 2000s.
US President Donald Trump, whose decision to kidnap Maduro has been widely condemned as a violation of international law, said US oil companies were prepared to invest billions of dollars to restart production.
Why is Venezuela’s heavy crude oil particularly attractive to the United States?
Some industry analysts are skeptical that U.S. oil companies will be drawn to Venezuela, at least not without significant incentives and guarantees.
They cite post-Maduro leadership uncertainty, Chavez’s past seizures of corporate assets, and an oversupply of oil on the global market as reasons why companies are hesitant to invest.
America’s largest oil companies, ExxonMobil and ConocoPhillips, withdrew from the country in 2007 following the seizure of their facilities by President Chávez, and both companies subsequently won large sums of money in international arbitration.
Speaking with President Trump at the White House on Friday, ExxonMobil CEO Darren Woods called Venezuela’s current state “uninvestable” and said “significant changes” would need to occur in the country to justify a return.
Chevron is currently the only major U.S. oil producer in the country, operating with a special exemption from Washington sanctions and is widely seen as best positioned to benefit from President Trump’s plan.
While there are differing views on the business case for Venezuela’s oil giants, analysts agree that one group in particular stands to benefit. It’s a US refinery.
The United States currently pumps more crude oil than any other country due to an explosion in drilling for light shale oil, but most of the country’s refineries were built to process heavier grades.
Nearly 70 percent of U.S. refining capacity is designed for heavy crude oil, according to U.S. fuel petrochemical manufacturers, a holdover from heavy investments made before the recent shale drilling boom.
Denton Cinquegrana, chief oil analyst at Oil Price Information Service, told Al Jazeera: “We need so-called ‘complex’ refineries with large conversion capacity. There are several such refineries in the Gulf.”
“Significant coker equipment was built to utilize heavy crude oil not only from Venezuela, but also from Mexico and other South American producing countries.”
Shon Hyatt, director of the Zege Business of Energy Initiative at the University of Southern California, said U.S. refineries would benefit “tremendously” from increased exports of Venezuelan crude.
“Many of the U.S. refineries on the coasts, such as Texas and Louisiana, are built and designed to process Venezuelan crude oil,” Hyatt told Al Jazeera.
“Venezuela has a history of exporting oil to the United States, as American oil companies were the first to enter, discover, pump, process, and export Venezuelan oil. Therefore, refineries along the coast were built to handle this type of oil.”
Hyatt said sanctions have for years replaced heavy Canadian crude oil with imports from Venezuela, but that could change if President Trump gets his way.
“Increased exports of heavy Venezuelan crude oil will displace Canadian heavy crude oil, as Venezuelan crude oil is typically sold to these refineries at lower prices,” he added.
