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After Chávez, What Happens to Venezuela's Oil?

The oil storage facility owned by Petróleos de Venezuela, known as PDVSA, on Lake Maracaibo, Venezuela
The oil storage facility owned by Petróleos de Venezuela, known as PDVSA, on Lake Maracaibo, VenezuelaPhotograph by Ana Maria Otero Borjas/Bloomberg

Investors have been cart-before-horse stoked about Venezuela, and with good reason. There’s lots of upside in an economy that arguably has the world’s largest proven oil reserves and yet has stagnated in the past 14 years. What’s now top-of-mind is how the successor to late president Hugo Chávez stewards state oil company Petróleos de Venezuela SA, whose strategy seems to be to rust while hoping energy prices remain high. Throw in a restive nation of 30 million and a welter of costly social bennies, and this caballero faces tough decisions.

Venezuela is one of the more peculiar players in the Mideast-heavy Organization of Petroleum Exporting Countries. Though it’s OPEC’s fourth-biggest producer, Venezuela has let its output fall by more than a fifth since Chávez came to power, leaving hundreds of billions in revenue on the table during a lengthy period of high crude prices. As promised, the charismatic leader plowed PDVSA’s profits into social welfare projects while starving the enterprise of investment in exploration and production.