While I agree that this whole thing will eventually have wide reaching and ranging implications. There's also the intrinsic problem that Maduro's empire still hasn't fallen. They may have taken a hit. Yet, the fact that they still run the country, and also provide the security necessary, make any help by the USA unlikely at this time.
The atrophy of the O&G infrastructure within Venezuela will take at minimum 12 months with Billions of USD invested to just double the output and squeeze themselves to close to 2M bbl/day. It'll likely take longer as that estimate is generous. If you follow any of the Oil experts that are out there sharing their knowledge, you'll find that none of the Big US based Oil Companies are currently jumping at the opportunity. That comes down to security. Capitalists are VERY predictable. They will continue doing what they are doing as long as they're making money. Only when the math checks out will they take the risk. At this time, the risk factors are still far too high for them to jump at this opportunity. Until that risk factor in lessened, likely when there's a democratic govt running Venezuela, and they have the security they feel is needed. Then they will jump in.
The other factor that very few people are talking about is that Venezuela's oil is on the other side of a mountain range from tide water. We Canadians have a very clear understanding of how difficult it can be to navigate through mother nature's geography. It only makes rebuilding and expanded new construction that much more difficult.
Trump's move on Venezuela is explicitly about oil, and Canada's 65% share of US crude imports makes this a real threat. The article's analysis mostly holds up, but two things matter more than it suggests.
First, Venezuelan production recovery is a decade-long slog, not a near-term risk. The author correctly identifies the "J-curve" problem: infrastructure atrophied, engineers fled, and rebuilding requires sustained capital and stability. Current oil prices (~$57/bbl) don't justify the investment yet. Meanwhile, replacing Canadian crude at US Gulf refineries is straightforward—that 450,000 bpd displacement is the actual near-term risk.
Second, Canada's tidewater options are live now, not future mitigation. Trans Mountain finished expansion in May 2024 and already ships 525,000 bpd to non-US markets, mostly China. Chinese refiners have pivoted 850,000 bpd toward Canadian oil in response to US tensions. That cushions the blow significantly.
The real threat isn't immediate displacement but gradual repositioning over five-plus years as Venezuelan production slowly recovers. Canada should accelerate next-phase pipeline capacity while China remains a willing buyer. TMX is already working.
Canadas oil production needs tidewater access. Once it reaches rise water, it is priced against Brent, not US WTI. Expanding tide water access for Canadian oil weakens Trumps hand against Canada. We need more western pipelines & we also need energy east brought back. Once we get the oil to tidewater it doesn’t really matter who buys it. Canada needs to be self sufficient with O&G. It’s absurd that we aren’t. The USA should treated as our customer of last resort.
I'm not sure you read the article or others, but there are only certain refineries that can process Canadian style oil (or Ven. Oil) these refineries need multi billion dollar upgrades to handle this stuff. Only refineries equipped for this can handle it and they control the set price. This does not paint a picture where new Tidewater adds straight up competitive pricing.
Any oil that reaches tidewater anywhere in the world is priced against a higher price, often Brent. WTI is a USA price. Just simply reaching tidewater gives us higher prices, which is why everyone who knows anything about Canadian oil sands wants access to tidewater. More customers, more money.
I did read the article and am very well read on the Canadian oil sands. There are many refineries that can process our blended bitumen, called WCS (western Canadian select) we also export a lot of barrels of SCO (synthetic crude oil) which sells as a premium to WTI. Pipelines can carry both blends. I think Riyal bank analysts are keeping track of where the shipments are going from the newly expanded trans mountain pipeline if you are curious on who some of our customers are.
Strikes me that this is an argument for electrification as quickly as possible and reduced long-term capital investment in Canada’s oil and gas industry. The Pacific Rim countries’ demand for oil is already forecast to diminish, and if US demand is to be filled from Venezuela, future markets for Canadian exports are shrinking.
A couple of thoughts. 'Immediately' isn't the issue. Payback on projects like pipelines is a 25-30 year process. What happens to Asian demand over the next 15-25 years is what really matters. The next 10 years are academic. And exporting is just the first step. Refining capacity doesn't currently exist in Canada or Asia to refine Canadian crude. It, too, suffers from a lengthy payback period. So from a practical and economic sense, I don't believe it a realistic option. Finally one must consider competitive issues. What barrels imported into Asia today are going to be more expensive than what we might get to Asia in 10 years??
What is academic? China itself imports 11 million barrels of oil per day and that amount is not forecast to decline any time soon. Yes, China is adding significant clean energy production, but from the research I have read that new energy generation capacity is feeding their growing overall energy requirements. So oil will be in the picture for the foreseeable future. China needs to buy oil, if Canada builds another pipeline they will buy it from Canada. Not sure why you think this is uneconomical. Besides, Japan and South Korea combined import 5 million barrels of oil per day, they need oil as well, why not sell it to our allies? Also Japan is able to handle heavy sour crude without too much difficulty. If they can get oil from a stable source such as Canada, why would they not jump at the chance?
I saw this today. I’m obviously incapable of assessing its accuracy but it makes a strong argument suggesting that Canada’s oil sands exports to the US might be at risk. Cursory and imperfect research does not indicate that China has meaningful refinery capacity that could handle Alberta’s oil sands product. One of the challenges is that much of what China imports is disguised for sanctions reasons and its true origin is accordingly obscured. But it strikes me that for a new pipeline to the west coast to be economically justifiable it must have a +25 year economic case to attract the requisite equity and debt to fund it. Lacking that, the federal government becomes the only prospective funder, and as a Canadian taxpayer I’d not be keen on subsidizing a declining industry with a horrible record of unmet pollution-remediation obligations. I would on the other hand, be pleased to see Canada encourage electrification at a faster pace (and perhaps small nuclear/thorium reactors).
Thanks, my thoughts exactly. What would be the effect of putting money for the imaginary new pipeline into sustainable energy projects? Crisis = opportunity?
Losing oil exports to the US wouldn't leave an energy hole in the Canadian economy, it would leave a financial one.
Renewable energy isn't generally exportable in the same way that oil is. So renewable energy projects, while it might be laudable and beneficial for other reasons, doesn't serve as a direct alternative to a pipeline.
I went looking last night at local firearm stores online and can tell you that 12guage slug/buckshot and 7.62/39 ammunition is disappearing rapidly. The latter is the ammunition that feeds army surplus SKS semi automatic rifles that are very popular in Canada.
Always nice to read a larger perspective on an important issue. Thank you for the quality information and for sharing it. I suspect this will be another failed American intervention. The USA is in for a human resource-intensive commitment and "expenditure" of technicians, quality-control specialists, and engineers, along with military commitments to guard and protect Venezuela's "infrastructure improvements". The infrastructure costs of a working Refinery are astonishing. The minimum cash needed to cover initial working capital and operational expenses before revenue stabilizes is $14,655 million (Financialmodelslab.com). Just imagine how much could be saved if environmental carbon-free alternatives were established. But then, without green power, I fear a return on Petro investments will just be another "if only we paid attention to science" moment in about 30-40 years.
Canada needs to build the infrastructure required to become a truly global energy power.
That means additional oil & gas pipelines to tidewater not only toward Asia, but also to Canada’s eastern and northern coasts alongside materially greater LNG liquefaction capacity.
Canada should also expand refining and processing capacity where the economics support it, capturing more value domestically rather than exporting only raw production.
Europe should be treated as a major strategic export market. European buyers increasingly value security of supply, geopolitical reliability and diversification and Canada can offer all three.
But this is not only an economic question. It is also a national-security and strategic-resilience issue.
Saudi Arabia’s East-West pipeline to the Red Sea is a useful example: it gives the Kingdom an alternative export route when the Strait of Hormuz is disrupted. That infrastructure is valuable not simply because of its day-to-day economics, but because it provides strategic redundancy.
Canada should think the same way.
Pipelines to the Atlantic, Pacific and potentially northern tidewater, LNG capacity, storage and selective refining infrastructure would give Canada greater optionality across the U.S., Europe and Asia.
Not every piece of national infrastructure needs to maximize near-term IRR. Some assets exist because a country cannot afford to depend on a single market, transportation corridor or geopolitical outcome.
For Canada, energy optionality is sovereignty.
The objective should be to build the infrastructure that allows Canadian energy to reach whichever global market values it most while strengthening national security, resilience and Canada’s position as one of the world’s most reliable energy suppliers. 🇨🇦
A lot more Canadians are catching up on how the oil industry really works.
It might be a big ask to get private money to invest back into Venezuela, time will tell that one.
One curve to throw at all this is that the country currently producing it the fastest has one of the smallest reserves. This might mean that the americans are going to have to retool to take both Canadian and Venezuelan oil. I've seen one report giving them 11 years at current production, Canada at 89 years. Venezuela has 1500 years of production but that's inflated by a very low extraction rate and arguably inflated reserves.
Deflecting? Fox News? Lol. I have delfected nothing and never mentioned Fox News, who I am not a fan of. Dont let that interfere with your one track, leftist mind though. I have clearly stated what is obviously true. You just can't see anything beyond what the US hating, leftist media says.
I have made a point that exposes your hater talking points. News flash...the US does not need their oil.
If not for Maduro turning a free, prosperous nation into a narco state allied with communists and Islamists to wage an assymetrical war against the US, this would not have happened. You are the one in denial and ranting about the ancilliary aspect of oil is the deflection. If Dems had done this you would be defending it. So predictable.
While I agree that this whole thing will eventually have wide reaching and ranging implications. There's also the intrinsic problem that Maduro's empire still hasn't fallen. They may have taken a hit. Yet, the fact that they still run the country, and also provide the security necessary, make any help by the USA unlikely at this time.
The atrophy of the O&G infrastructure within Venezuela will take at minimum 12 months with Billions of USD invested to just double the output and squeeze themselves to close to 2M bbl/day. It'll likely take longer as that estimate is generous. If you follow any of the Oil experts that are out there sharing their knowledge, you'll find that none of the Big US based Oil Companies are currently jumping at the opportunity. That comes down to security. Capitalists are VERY predictable. They will continue doing what they are doing as long as they're making money. Only when the math checks out will they take the risk. At this time, the risk factors are still far too high for them to jump at this opportunity. Until that risk factor in lessened, likely when there's a democratic govt running Venezuela, and they have the security they feel is needed. Then they will jump in.
The other factor that very few people are talking about is that Venezuela's oil is on the other side of a mountain range from tide water. We Canadians have a very clear understanding of how difficult it can be to navigate through mother nature's geography. It only makes rebuilding and expanded new construction that much more difficult.
Trump's move on Venezuela is explicitly about oil, and Canada's 65% share of US crude imports makes this a real threat. The article's analysis mostly holds up, but two things matter more than it suggests.
First, Venezuelan production recovery is a decade-long slog, not a near-term risk. The author correctly identifies the "J-curve" problem: infrastructure atrophied, engineers fled, and rebuilding requires sustained capital and stability. Current oil prices (~$57/bbl) don't justify the investment yet. Meanwhile, replacing Canadian crude at US Gulf refineries is straightforward—that 450,000 bpd displacement is the actual near-term risk.
Second, Canada's tidewater options are live now, not future mitigation. Trans Mountain finished expansion in May 2024 and already ships 525,000 bpd to non-US markets, mostly China. Chinese refiners have pivoted 850,000 bpd toward Canadian oil in response to US tensions. That cushions the blow significantly.
The real threat isn't immediate displacement but gradual repositioning over five-plus years as Venezuelan production slowly recovers. Canada should accelerate next-phase pipeline capacity while China remains a willing buyer. TMX is already working.
That is obvious! Just make sure you arise from time to time, move the legs, rest the eyes and grab a cool one out of the fridge!
Japan is changing its refinery to heavy crude for our oil. We’re paying part of that tab.
India wants our oil and others including Europe.
China is moving past fossil fuels at an accelerated rate. Especially with the Middle East war.
So Alberta still has time to adjust?
Yes, we do have time.
“Hansard” I have absolutely no idea how you have such a commanding knowledge of myriad issues you tackle. Excellent!
I read far too much!
Katie Miller should go back to colouring with her crayons. She definitely doesn’t know anything about economics.
Great article! For anyone interested here is a deep(ish) dive:
Excellent article again, Policy Hawk. You have hit the Substack running and are headed for “prime time”!
Trump wants your water too. Our snow pack so far this winter is dismal. Drought conditions loom.
Canadas oil production needs tidewater access. Once it reaches rise water, it is priced against Brent, not US WTI. Expanding tide water access for Canadian oil weakens Trumps hand against Canada. We need more western pipelines & we also need energy east brought back. Once we get the oil to tidewater it doesn’t really matter who buys it. Canada needs to be self sufficient with O&G. It’s absurd that we aren’t. The USA should treated as our customer of last resort.
I'm not sure you read the article or others, but there are only certain refineries that can process Canadian style oil (or Ven. Oil) these refineries need multi billion dollar upgrades to handle this stuff. Only refineries equipped for this can handle it and they control the set price. This does not paint a picture where new Tidewater adds straight up competitive pricing.
Any oil that reaches tidewater anywhere in the world is priced against a higher price, often Brent. WTI is a USA price. Just simply reaching tidewater gives us higher prices, which is why everyone who knows anything about Canadian oil sands wants access to tidewater. More customers, more money.
I did read the article and am very well read on the Canadian oil sands. There are many refineries that can process our blended bitumen, called WCS (western Canadian select) we also export a lot of barrels of SCO (synthetic crude oil) which sells as a premium to WTI. Pipelines can carry both blends. I think Riyal bank analysts are keeping track of where the shipments are going from the newly expanded trans mountain pipeline if you are curious on who some of our customers are.
Alberta already has a tide water port that is currently under utilized. To insure our soveriegnty build a refinery in Alberta to serve CANADA.
Alberta is landlocked.
he probably means Trans mountain.
Strikes me that this is an argument for electrification as quickly as possible and reduced long-term capital investment in Canada’s oil and gas industry. The Pacific Rim countries’ demand for oil is already forecast to diminish, and if US demand is to be filled from Venezuela, future markets for Canadian exports are shrinking.
That is not correct. Currently China, Japan and South Korea import 16 million barrels of oil per DAY and that is not forecast to reduce imminently.
A couple of thoughts. 'Immediately' isn't the issue. Payback on projects like pipelines is a 25-30 year process. What happens to Asian demand over the next 15-25 years is what really matters. The next 10 years are academic. And exporting is just the first step. Refining capacity doesn't currently exist in Canada or Asia to refine Canadian crude. It, too, suffers from a lengthy payback period. So from a practical and economic sense, I don't believe it a realistic option. Finally one must consider competitive issues. What barrels imported into Asia today are going to be more expensive than what we might get to Asia in 10 years??
What is academic? China itself imports 11 million barrels of oil per day and that amount is not forecast to decline any time soon. Yes, China is adding significant clean energy production, but from the research I have read that new energy generation capacity is feeding their growing overall energy requirements. So oil will be in the picture for the foreseeable future. China needs to buy oil, if Canada builds another pipeline they will buy it from Canada. Not sure why you think this is uneconomical. Besides, Japan and South Korea combined import 5 million barrels of oil per day, they need oil as well, why not sell it to our allies? Also Japan is able to handle heavy sour crude without too much difficulty. If they can get oil from a stable source such as Canada, why would they not jump at the chance?
I saw this today. I’m obviously incapable of assessing its accuracy but it makes a strong argument suggesting that Canada’s oil sands exports to the US might be at risk. Cursory and imperfect research does not indicate that China has meaningful refinery capacity that could handle Alberta’s oil sands product. One of the challenges is that much of what China imports is disguised for sanctions reasons and its true origin is accordingly obscured. But it strikes me that for a new pipeline to the west coast to be economically justifiable it must have a +25 year economic case to attract the requisite equity and debt to fund it. Lacking that, the federal government becomes the only prospective funder, and as a Canadian taxpayer I’d not be keen on subsidizing a declining industry with a horrible record of unmet pollution-remediation obligations. I would on the other hand, be pleased to see Canada encourage electrification at a faster pace (and perhaps small nuclear/thorium reactors).
https://open.substack.com/pub/rdermody/p/the-heavy-crude-realignment?utm_campaign=post-expanded-share&utm_medium=web
Thanks, my thoughts exactly. What would be the effect of putting money for the imaginary new pipeline into sustainable energy projects? Crisis = opportunity?
Losing oil exports to the US wouldn't leave an energy hole in the Canadian economy, it would leave a financial one.
Renewable energy isn't generally exportable in the same way that oil is. So renewable energy projects, while it might be laudable and beneficial for other reasons, doesn't serve as a direct alternative to a pipeline.
I went looking last night at local firearm stores online and can tell you that 12guage slug/buckshot and 7.62/39 ammunition is disappearing rapidly. The latter is the ammunition that feeds army surplus SKS semi automatic rifles that are very popular in Canada.
So when are you, #francesk, and Charlie Angus heading south with your arms to fight for Venezuela? 😬
Mike, why don’t you tell us all what PP would do here? Aside from getting in bed with Trump, that is.
Always nice to read a larger perspective on an important issue. Thank you for the quality information and for sharing it. I suspect this will be another failed American intervention. The USA is in for a human resource-intensive commitment and "expenditure" of technicians, quality-control specialists, and engineers, along with military commitments to guard and protect Venezuela's "infrastructure improvements". The infrastructure costs of a working Refinery are astonishing. The minimum cash needed to cover initial working capital and operational expenses before revenue stabilizes is $14,655 million (Financialmodelslab.com). Just imagine how much could be saved if environmental carbon-free alternatives were established. But then, without green power, I fear a return on Petro investments will just be another "if only we paid attention to science" moment in about 30-40 years.
Adaptation, not mitigation, is the new, not yet mentioned buzzword. Intended to increase shareholder value.
THIS IS AN OLD STORY… WHO IS WORRIED NOW? CANADA’S not worried. We got this. 🇨🇦🇨🇦🇨🇦
This aged well (in a bad way)…
They’re next.
Canada needs to build the infrastructure required to become a truly global energy power.
That means additional oil & gas pipelines to tidewater not only toward Asia, but also to Canada’s eastern and northern coasts alongside materially greater LNG liquefaction capacity.
Canada should also expand refining and processing capacity where the economics support it, capturing more value domestically rather than exporting only raw production.
Europe should be treated as a major strategic export market. European buyers increasingly value security of supply, geopolitical reliability and diversification and Canada can offer all three.
But this is not only an economic question. It is also a national-security and strategic-resilience issue.
Saudi Arabia’s East-West pipeline to the Red Sea is a useful example: it gives the Kingdom an alternative export route when the Strait of Hormuz is disrupted. That infrastructure is valuable not simply because of its day-to-day economics, but because it provides strategic redundancy.
Canada should think the same way.
Pipelines to the Atlantic, Pacific and potentially northern tidewater, LNG capacity, storage and selective refining infrastructure would give Canada greater optionality across the U.S., Europe and Asia.
Not every piece of national infrastructure needs to maximize near-term IRR. Some assets exist because a country cannot afford to depend on a single market, transportation corridor or geopolitical outcome.
For Canada, energy optionality is sovereignty.
The objective should be to build the infrastructure that allows Canadian energy to reach whichever global market values it most while strengthening national security, resilience and Canada’s position as one of the world’s most reliable energy suppliers. 🇨🇦
A lot more Canadians are catching up on how the oil industry really works.
It might be a big ask to get private money to invest back into Venezuela, time will tell that one.
One curve to throw at all this is that the country currently producing it the fastest has one of the smallest reserves. This might mean that the americans are going to have to retool to take both Canadian and Venezuelan oil. I've seen one report giving them 11 years at current production, Canada at 89 years. Venezuela has 1500 years of production but that's inflated by a very low extraction rate and arguably inflated reserves.
Deflecting? Fox News? Lol. I have delfected nothing and never mentioned Fox News, who I am not a fan of. Dont let that interfere with your one track, leftist mind though. I have clearly stated what is obviously true. You just can't see anything beyond what the US hating, leftist media says.
I have made a point that exposes your hater talking points. News flash...the US does not need their oil.
If not for Maduro turning a free, prosperous nation into a narco state allied with communists and Islamists to wage an assymetrical war against the US, this would not have happened. You are the one in denial and ranting about the ancilliary aspect of oil is the deflection. If Dems had done this you would be defending it. So predictable.