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Where is Venezuela's oil industry headed?

Venezuela is a country with many opportunities, especially in the area of fossil fuels. This country has all the resources to consolidate itself as an integral territory capable of supplying itself with its own energy sources. But it lacks technological investment to modernize the production processes of different industries. Previously, we had told you about the 3 most solid industries to invest in Venezuela and how these opportunities are being taken advantage of. So in this opportunity we will delve into the current scenario of the oil industry in Venezuela.

Current overview of the oil industry in Venezuela

The Reuters news portal reports that Venezuelan crude oil production has increased periodically, reaching 700,000 barrels per year. per day in the last period of the year 2021. This compensates for the lack of oil in the market as a result of a breakdown in a very important oil pipeline in Libya. In turn, Chinese consumption has managed to stabilize the energy demand for the resource, although there are still expectations of possible border closures and flight cancellations due to variants of the coronavirus. So there is no certain position that can provide security in the constant purchase and sale of oil, but the fact is that it continues to be one of the main sources of energy in the world.

Likewise, the financial sanctions that have been imposed by the United States, coupled with the lack of modern infrastructure in the oil fields and refineries, continue to be an obstacle for Venezuela. But both countries have proven to be open to capital investment in different industries, so oil profitability can be guaranteed if resources are properly invested.

In the legal sphere, both countries have demonstrated that they can grant special licenses in the event of U.S. sanctions, so legally there are resources to guarantee the operation of companies in Venezuelan territory. And in some cases, energy cooperation can always improve relations between the countries involved, while promoting the participation of private companies that pay taxes in these commercial activities.

Investment schemes for the oil industry in Venezuela

For the Latin American region different investment schemes apply, we must remember that we are located in volatile economies with many risks. But there are emerging economies that promote the use of cryptocurrencies in these risky environments, so the globalization of services and export of products should be feasible if there are no political restrictions on commercial activities. In the case of Venezuela, flexibilities such as the use of foreign currencies in banking transactions somehow promote connections to international markets. Then it depends on the business opportunities that foreign entrepreneurs can find here in the country and the legal environment in which they find themselves.

The oil industry has the advantage of having infrastructure and soil studies that determine the raw material that can be obtained here. What it needs, and the opportunity that is in sight, is the manufacturing of that oil in less expensive energies.

These types of investments with high risk tolerance are designed with long investment schedules. In emerging markets they are framed as "frontier market investments". This means that they function as long-term investments that are a perfect fit for the mining and hydrocarbon industries. Because if you plan to modernize the machinery for the manufacture of extra heavy crude oil. Lighter and more profitable resources can be obtained for national and international commercial activities. As is the case of the United States, which will reach energy independence by 2035 thanks to its technological investments. At the same time it competes in the light oil market together with Saudi Arabia.

Profitability and security of foreign capital

In the case of profitability and security of foreign capital in Venezuela, frontier markets are categories that need to be studied to guarantee financial success. Diversification is key to have a good return on international capital. Although investors only allocate a small portion of their investment portfolios to the Venezuelan market, good opportunities are found when viewed in a globalized context.

Despite the political, economic and social circumstances, Venezuela has not been closed to technological investment in its companies and the creation of new factories in the country. In fact, in this constant search for diversification, specific opportunities have been found in different industries such as the manufacture of cleaning products, tires, among others. The security of this capital depends on the way in which each company assumes the risks of its commercial activities. Therefore, if investments are made with a broad perspective of the implications of these risks, the strengths and potentialities outweigh the benefits.

Opportunities in the oil industry

Regarding the oil industry in Venezuela, no other country has the potential in mineral reserves that this country has. Therefore, there are currently two modes of investment: the acquisition of old machinery and infrastructure or the total investment in new deposits and exploitation areas. Venezuela has the natural resources at its disposal, it would only be necessary to verify the legal framework of the projects for the extraction or manufacture of petroleum products. Undoubtedly, Venezuelan geology offers many benefits within territories that are not hostile and thanks to the existence of the basic infrastructure for extra heavy oil extraction, it is not necessary to start from scratch as in other territories. Likewise, there is a human resource in constant training which makes the Venezuelan territory a special frontier market.

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