Think of it as Yoga for the brain, we are going to stretch a bit.
The Biggest Lie About Venezuela’s Oil: Who Really Keeps the Money
“Oil in the ground has no value. Oil above ground has the value the system allows someone to profit from it.” -- YNOT!
There is a fundamental misunderstanding—deliberate or ignorant—at the heart of Venezuela’s oil debate.So let’s dismantle it carefully, with numbers, not slogans.
First Principle: Venezuela Does Not “Sell” Oil
Venezuela does not operate like a merchant selling barrels from a warehouse. The Republic owns the subsoil and the hydrocarbons, but it does not create oil wealth by ownership alone.
Oil wealth is created only when someone does the work:
Exploration and seismic studies
Drilling and well completion
Extraction and lifting
Processing and upgrading
Transportation, storage, shipping
Marketing and commercialization
That work is done by operating companies—whether PDVSA, Chevron, Repsol, or any other firm.
The State’s income does not come from selling oil—it comes from taxes and royalties charged to whoever produces it.
Let’s Put the Numbers on the Table
Assume a barrel of oil sells at $70.
Step 1: Royalties (Before Anything Else)
30% royalty paid immediately to the State
That is $21 per barrel
The company is left with $49
This royalty is paid whether the company is profitable or not.
Step 2: Statutory Taxes and Funds
From the remaining $49, the company must pay:
$3.30 extraction tax
1.1% to a social fund
2% science & technology tax
0.1% import tax
These are fixed claims by the State, not contingent on profits.
Step 3: Operating Costs (The Part Everyone Ignores)
Now we subtract the real-world cost of producing oil in Venezuela:
Labor and wages
Electricity and fuel
Equipment maintenance
Transportation and logistics
Contractors, suppliers, security
Accounting, legal, compliance
That averages ~$28 per barrel.
And this matters:
That $28 does NOT leave the country.
It is paid to:
Venezuelan oil workers
Construction crews
Truck drivers and port workers
Electricians, mechanics, engineers
Lawyers, accountants, office staff
This is domestic income, not “corporate profit.”
So What’s Left for the Company?
After all of that, the company’s gross operating profit is about:
$17.20 per barrel
But we are not done.
Second Layer of Taxes (Yes, There’s More)
From that $17.20:
1% sports law tax
1% anti-drug law tax
5% PDVSA social fund contribution
Now the operating profit falls to roughly:
$15.30 per barrel
Income Tax: The Final Cut
50% corporate income tax
That leaves:
$7.65 net profit per barrel
Mixed Companies: The Ownership Split
Under Venezuela’s mixed-company regime:
60% goes to PDVSA
40% goes to the private partner
So the private company’s final share is:
≈ $3.05 per barrel – Out of $70.
Let that sink in.
The Reality: 92–95% Government Take
Everything shown in blue on the fiscal chart is called government take or tax pressure.
Venezuela: ~92–95%
Global average: ~69%
Guyana (new competitor): ~57%
That means:
Global companies keep ~31% elsewhere
Guyana companies keep ~43%
In Venezuela, companies keep ~5%
And people still ask why capital avoids Venezuela.
“But Chevron Is Still There—Why?”
Because scale matters.
~250,000 barrels/day
~$3 per barrel
≈ $22.5 million per month
That sounds big—until you realize:
Much of it must be reinvested
Payments are often delayed
Dividends are sometimes not paid at all
Suppliers stop extending credit because PDVSA doesn’t pay
Bureaucracy blocks procurement and contracting
Chevron stays not because the business is attractive today, but because:
They are buying an option on a future Venezuela.
A future where:
Rules are clear
Contracts are honored
Capital is not treated as an enemy
The Real Cost of Ideology
People cheer these taxes and say: “This is how you govern.”
No. This is how you stay poor.
Venezuela produces less than 1 million barrels/day today.
It could easily produce 3–5 million with proper incentives.
Multiply the same revenue structure by:
3× production
5× employment
10× downstream petrochemicals
That is how nations get rich.
Numbers above are old, but they reflect when Venezuela was actually a Global oil producer.
Oil Underground Is Worth Zero
Having the world’s largest proven reserves means nothing if:
Capital won’t come
Technology won’t enter
Talent leaves
Wells decline
Oil underground feeds no one.
Oil transformed into:
Jobs
Industry
Exports
Petrochemicals
Power generation
—that is real wealth.
What Venezuela Actually Needs
Nothing exotic. No ideology.
Just three things:
Trust
Rule of law
A competitive business model
With those:
Capital flows
Production rises
Employment explodes
The State earns more—not less
That is the paradox socialism refuses to accept:
Lower pressure per barrel × more barrels = far more national wealth
Final Thoughts
Venezuela is not poor because it lacks resources.
It is poor because it punishes the process that turns resources into wealth.
Fix the rules.
Multiply production.
Let math—not slogans—do the work.
Oil Reserves – Venezuela vs Guyana
Venezuela
Has the largest proven oil reserves in the world, estimated at about 303 billion barrels. (Worldometer)
Much of these reserves are extra-heavy crude in the Orinoco Belt, which is technically and economically more challenging to extract. (Al Jazeera)
Guyana
Has significantly smaller total reserves, but recent discoveries offshore (Stabroek Block and others) have added billions of barrels; estimates range from 8 billion to over 11 billion barrels and rising. (Wikipedia)
These are conventional offshore crude, which is generally cheaper and easier to develop relative to Venezuela’s extra-heavy crude. (Wikipedia)
Oil Production (2023–2025)
Venezuela
Production remains low relative to reserves, roughly 0.8–1.0 million barrels per day (mbpd) in recent years due to underinvestment, mismanagement, and sanctions. (Allianz Global Investors)
Output is far below its historical peak (around 3.5 mbpd decades ago) and constrained by infrastructure and capital scarcity. (Wikipedia)
Guyana
Rapidly growing production since 2019; around ~620,000–645,000 bpd in 2024–early 2025. (Reuters)
Development of new projects could push production toward ~1.3 mbpd by 2027. (Wikipedia)
Fiscal / Contract Terms
Venezuela
Historically high tax and government take, though specific effective fiscal rates vary by contract type and regime. (IDB Publications)
Recent reforms (Hydrocarbons Law, production/participation contracts) aim to attract investment but still reflect heavy state involvement. (S&P Global)
Complex bureaucracy and state dominance through PDVSA remain challenges for private partners. (Mondaq)
Guyana
Early offshore deals (e.g., Stabroek PSA) included very low royalties (~2%) and high cost-recovery ceilings (up to 75%), meaning slower revenue to the government early in life of the project. (gra.gov.gy)
Newer reforms under the 2023 Petroleum Activities Act raise royalties (to ~10%), limit cost recovery (65%), and impose a 10% corporate tax, aligning the regime more with global norms. (Foley & Lardner LLP)
Profit oil and revenue-sharing structures define how government share increases as costs drop. (gra.gov.gy)
Economic Impact
Venezuela
Oil historically accounted for a large share of export earnings and government revenues. (EIA)
Despite enormous reserves, the country’s oil sector struggles to generate growth due to low production, underinvestment, and political/economic instability. (IndexMundi)
Export values are low compared to reserve size; Venezuela exported about $4 billion in crude in 2023, far below global peers. (Newsweek)
Guyana
Oil has been a major driver of GDP growth, with GDP expanding in double digits (e.g., 62.3% in 2022). (University of Navarra)
Guyana’s oil revenues have supported its Natural Resource Fund, which held billions of dollars and contributed to macroeconomic stability. (MINING.COM)
Rapid production increases have made Guyana one of the fastest-growing oil producing economies. (Wikipedia)
If you’ve read this so far, thank you and the conclusion should be unavoidable. This is exactly why Exxon’s CEO has publicly stated they will not invest in Venezuela unless substantial changes are made. The problem isn’t geology. It’s policy. Under the current framework, Venezuela isn’t risky—in his words = it’s uninvestable.
