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Upcoming Venezuela vote sparks interest in the Canadian oil patch

Venezuelan President Hugo Chavez greets supporters in the rain during his closing campaign rally in Caracas on Thursday.


The possibility of an upset in Venezuela's Sunday presidential election has stoked substantial interest in the Canadian oil patch, which sees a potentially lucrative outcome if Hugo Chavez is ousted.

Henrique Capriles, the reform-minded contender for the Venezuelan presidency, has pledged to review the country's oil deals if he is elected, a prospect that has suggested to energy executives he could reopen the country to outside investment if he wins.

Venezuela surpassed Saudi Arabia as the country with the world's largest oil reserves this summer, and a reversal of nationalization policies enacted by Mr. Chavez could make it the object of substantial foreign interest.

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"The opportunity suite would be incredibly large," said Martin Molyneaux, vice-chairman at Calgary's FirstEnergy Capital.

Consider the contrasting stories of Venezuela and Colombia. In Venezuela, oil production has fallen from 3.3 million barrels a day in 1997 to 2.2 million last year. In Colombia, which has welcomed outside investment, oil output is up from 530,000 barrels a day in 2004 to 914,000 in 2011.

"Easily over half" that rise in Colombia has been accomplished by companies listed on the Toronto stock exchange, Mr. Molyneaux said. Some of those companies boast Venezuelan talent with the expertise to return to the home country and exploit Venezuelan resources.

Even Canadian oil-sands companies might be interested, given the similarities of the heavy oil in the two countries.

"Canadian companies, in particular, have an ability to really bring a wealth of knowledge to bear in those opportunities," said Corey Ruttan, CEO of Petrominerales, which operates in Colombia and Peru.

It's not just oil. Venezuela is a "mini Canada with better weather, in that it's got the same sort of resource base," one executive said. Venezuelan gold and coal mining, for example, have seen major declines in the past decade, suggesting there is opportunity there.

Still, even if Mr. Capriles wins, the road forward is not certain.

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"The consequences of all these years of Chavez has resulted in Chavez controlling all the institutions of the country," said Jorge Neher, a Venezuelan partner with law firm Norton Rose. That could slow the process of shifting direction.

At the same time, Venezuelan tradition is for Congress to pass an "enabling law" to allow a new president to rapidly set in place a new agenda, Mr. Neher said.

"We hope there's going to be a lot of changing," he said.

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