Fears that Venezuela’s oil resurgence could intensify competition with Canada are mounting, but some energy experts are brushing aside concerns that it will seriously threaten Canada’s bulk oil supply to the U.S.
Heavy crude pumped from Venezuela’s fields, similar to Alberta’s heavy bitumen, is now in the spotlight after the American military captured Venezuelan President Nicolás Maduro in an audacious raid and U.S. president Donald Trump vowed to revive the country’s oil industry.
Shares of Canada’s top oilsands companies and the TSX energy subindex tumbled on Monday in response to worries that Venezuela’s heavy crude could flood U.S. Gulf Coast refineries and edge out Canadian producers.
Rory Johnston, a Toronto-based oil market researcher, said he is not worried that Venezuela will replace Canada’s dominant role in providing oil to the U.S because the bulk of Canadian oil — about 2.5 million barrels a day — is shipped by pipeline from Alberta to landlocked refineries in the U.S. Midwest.
Those pipelines travel south only, giving Canada a strong foothold in the inland markets, making it hard for Venezuelan barrels to reach them, he said.
“I don’t think this is a major near-term issue for Canadian oil companies and their investors, particularly not to the scale of the sell-offs we saw in Canadian equity prices,” Johnston said.
The dense, sour crude from Venezuela was a natural fit for Gulf Coast refineries — which had been designed to process heavy oil — for decades before the Trump administration imposed sweeping sanctions on Venezuela’s state-owned oil exports in 2017.
But Johnston said that while increased Venezuelan production could boost competition in the Gulf Coast, that region represents a small market for Canada.
The less than 400,000 barrels a day shipped to the Gulf Coast account for only a small portion of the roughly four million barrels a day Canada sends to the U.S. overall.
On Tuesday, Prime Minister Mark Carney downplayed the threat from rising Venezuelan oil production during a press conference in Paris, arguing that Canadian crude remains cheaper, cleaner, and a safer bet for buyers.
“Canadian oil will be competitive because it is low-risk, clearly low-risk, low cost — the marginal costs, there’s been huge progress on getting down the costs, and low carbon, which is what the Pathways project carbon capture will bring,” Carney said.
Alberta and Ottawa officials committed in November to moving forward with the Pathways project, proposed by a group of major Canadian oilsands companies, to capture carbon from oilsands facilities and achieve net-zero emissions by 2050.
Heather Exner-Pirot, director of energy, natural resources, and environment with think-tank Macdonald-Laurier Institute, said she is not convinced Venezuela will be the main competitor with Canada at the Gulf Coast.
The South American country would need significant upfront investment and at least five to 10 years to lift oil production from about 800,000 barrels a day currently to between two and three million barrels a day — its peak level in the 1990s, both Exner-Pirot and Johnston noted.
“I just don’t think there’s anyone looking to spend tens of billions of dollars. And if they were, I don’t think they would choose Venezuela first,” said Exner-Pirot, pointing to Venezuela’s political instability and rampant corruption.
But she said the prospect of a Venezuelan oil comeback should prompt Canada to move faster to diversify oil exports beyond its near-sole customer, the U.S., and into Asian markets.
Philippe Le Billon, a professor of geography and global affairs at the University of British Columbia, said he expects calls for diversification to bolster broader support for building an additional bitumen pipeline from Alberta to the B.C. coast.
He warned, however, that banking on oil is no long-term strategy, noting that key Asian buyers like China — now Venezuela’s top customer — are already pivoting to electricity and cleaner energy.
While Billon says he believes a Venezuelan oil boom remains unlikely, he said there could be a dampening of investment and market valuation of the oil companies in Alberta.
“If there is further oil glut for the U.S. oil market and Canada faces continued difficulties in diversifying its oil markets, then it’s normal that people don’t want to invest in a market that is already flooded.”
