It’s hard to point the finger anywhere other than at governments since Hugo Chávez gained power in 1998. In the early 2000s, oil accounted for over 90% of Venezuela’s export revenue and nearly half of its national budget. Until 2006, multinational corporations like ExxonMobil and Chevron played significant roles extracting and refining oil, sharing profits with state-owned oil giant Petróleos de Venezuela (PDVSA).

But in 2006 Chávez’s government nationalised the oil industry, demanding a controlling stake in all projects. Some companies complied; others, such as ExxonMobil, left the country. There followed a sharp decline in foreign investment and technical expertise.

Record-high revenues were used to nationalise other industries and expand access to food, housing, healthcare and education. But with state control and centralised planning came a lack of expertise that left Venezuela exposed when a worldwide oil glut caused prices to crash in 2014, the year after Chávez died and was succeeded as President by Nicolas Maduro.

The country could no longer sustain expansive welfare programmes. Hyperinflation followed. The government resorted to external borrowing, plunging the country into debts it couldn’t repay. Critics claimed its nationalisation policy was riddled with corruption, billions of dollars in oil revenues being siphoned off by profiteers.

Maduro was re-elected in 2024 amid widespread claims that the result was rigged. Predictably perhaps, in March 2025 the Trump administration cancelled a licence for Chevron to operate in Venezuela, citing Maduro’s lack of electoral reforms.

Recently, opposition politicians drafted proposals for energy sector reform that would include international involvement. PDVSA would be scaled back, and Venezuelan oil and gas fields, refineries and midstream assets would be offered to foreign companies. International standards for investment protection would be embedded into the legal system.

The proposal envisaged increasing oil output above 3mn b/d, a level not seen in 15 years. (According to data from the Energy Institute’s Statistical Review of World Energy, the Venezuelan oil industry was only able to produce 960,000 b/d.) But what, at face value, seems a pragmatic response to crisis was dismissed by Maduro’s Foreign Minister Yvan Gil as a ‘desperate attempt to gift our sovereignty to foreign interests’.

Fig 1: Venezuela’s oil production, in 1,000 b/d – figures from the Energy Institute’s Statistical Review of World Energy report that oil production has slightly increased in the last few years, but output remains a third of what it was in the ‘noughties’
Source: Energy Institute Statistical Review of World Energy, New Energy World analysis

Meanwhile, hydropower, like oil, ought to be a success story. Yet progress has been stymied on several fronts: drought affecting water levels in Western Venezuela’s hydroelectric dams; projects left unfinished amid economic crisis and allegations of corruption, whilst US sanctions blocked equipment servicing and spare part imports.

In March 2024, plans were announced to reactivate the General José Antonio Páez hydro complex in Barinas state, promising an initial output of 120 MW, eventually rising to 240 MW. However, in December 2024 the plant was only supplying a reported 60 MW. It leaves the nation relying heavily on the 10,000 MW capacity Guri dam, in Bolívar state, thought to produce 80% of Venezuelan electricity.

The more distant you are from Guri, the more likely the prospect of blackouts. But when the country was plunged into darkness for 12 hours in August 2024, the government blamed sabotage attacks on the grid by hostile far right groups. State electricity company Corpoelec applied selective rationing, although it shielded Caracas and central areas from power cuts.

To curb pressure on the grid, in March this year the government introduced a three-day week, imposing a 13.5 hours working limit for all but essential services. It paints a picture of a besieged infrastructure.

Four years ago, Dr Chris Sabatini, Senior Fellow for Latin America at Chatham House (with Associate Fellow Walt Patterson), wrote a paper titled Reforming Venezuela’s electricity sector. Sabatini says the impact of drought could have been alleviated had other options been explored. ‘Solar, wind and biogas have never been developed – Venezuela hasn’t made the necessary capital investment in oil and electricity. The grid hasn’t been updated in decades. It’s affected hospitals, schools and industry. President Biden tried to help open up investment into the electricity sector but there weren’t any takers,’ he said.

Part of Venezuela’s problem, according to Sabatini, is criminality – aside from corruption, the ‘millions drawing down electricity (in shantytowns) without paying for it’. Meanwhile the country continues paying a high price for its policies of oil-subsidised food, with ‘fly-by-night education’ and ‘a complicated exchange rate policy that increased corruption’. He adds: ‘[Government] killed the goose that laid the golden egg.’

During Venezuela’s general strike of 2002–2003, Chávez fired 19,000 PDVSA employees, replacing them with government loyalists. At a stroke, this eliminated a reservoir of expertise from Venezuela’s oil industry, including people experienced in handling the Orinoco Belt’s extra-heavy crude oil, of which the country has vast reserves. Within the industry there was, says Sabatini, ‘a complete collapse… it was a cesspool of corruption and mismanagement’.

Sabatini worries that Venezuela has shrunk to becoming an ‘oil only’ economy. But where might a solution start? The country needs to open up to ‘some level of international investment’ but this requires a fresh mindset. Pressure from within seems unlikely, given the outcome of last year’s presidential poll. ‘There are regional elections this year, but the opposition won’t participate,’ says Sabatini. This doesn’t augur well for democracy or the Venezuelan economy.

While in Cuba...
One beneficiary of Venezuela’s haphazard policies has been Cuba, politically a kindred spirit and a grateful recipient of heavily-subsidised Venezuelan oil. Having long endured economic blockade by the US, Cuba’s economy is also on its knees. Endless power outages tell the story; and noises of government intent to improve matters have amounted to little. 

The picture looked brighter in 2017 when Cuba hosted the International Renewable Energy Conference. It also enacted a foreign investment law allowing overseas investors 100% ownership of renewable energy projects while cutting the tax on joint ventures from 30% to 15%.

But it failed to be the hoped-for catalyst. A report by Cuba’s National Office of Statistics (ONEI) released in May revealed a 25% drop in electricity generation during the previous four years, triggering blackouts lasting up to 18 hours a day. In 2024, generation amounted to 14,334 GWh, compared to 19,070 GWh in 2020.

One key factor is a lack of foreign currency – there’s no money to acquire materials and equipment for renovating and maintaining energy infrastructure. The shift to renewable sources is painfully slow – these account for only 4% of the country’s total electricity output. It’s far short of a commitment made in 2019 with the United Nations to generate 29% from renewables by 2025.

The government claims to have a recovery plan, ‘an inter-institutional approach prioritising energy sovereignty and the transition to cleaner and more efficient energy sources’. Yet targets keep slipping. For instance, there were plans to add over 500 MW of solar-generated energy by summer 2025, with a projection of 1,800 MW by the end of 2026. However, at the end of 2024, the forecast was lowered to 1,000 MW. Installing PV (photovoltaics) and wind can be expensive; and money – all too scarce – is needed to upgrade the grid and install storage batteries.

Best intentions have a habit of unravelling. The government planned to build 19 biomass plants with a total capacity of 755 MW by 2021. First to be completed, costing $160mn, was at Ciro Redondo sugar mill in Las Tunas province, with an installed capacity of 60 MW. But at times it has lain idle due to a lack of bagasse and marabú (hardwood), and issues with the generator. It faces an uncertain future.

In 2019, under the Chinese-funded Herradura 1 project, construction began of a wind farm meant to have 34 turbines and a total installed capacity of 51 MW. Five years later, only 22 bases had been built, with the electrical substation and transmission lines pending. The scheme has been plagued by contractual disputes and a lawsuit from North American Sugar, which is seeking compensation for assets confiscated by the Castro regime during the 1960s.

Ieda Gomes, an expert in Latin America’s natural gas, energy and infrastructure industries, and former CEO of Brazil’s largest gas utility, São Paulo Gas Company, expects Cuba to struggle for the foreseeable future. US sanctions and the state monopoly of the energy system inhibit private investment, with the latter ‘encouraging bureaucratic inertia’, she says.

However, Cuba does have an ally in Brazil, which opposes the US embargo and supports the country’s inclusion in multilateral forums like BRICS (Brazil, Russia, India, China and South Africa), which, Gomes believes, could open future credit opportunities. ‘[Brazil’s] government is cautiously re-engaging via diplomacy and development partnerships,’ she says. ‘Brazil signed science and technology agreements in 2023 and 2024 with Cuba, with renewable energy as a priority.’ However, she adds, ‘actual energy sector assistance remains limited’.

Brazil’s President Lula de la Silva has also called for Venezuela to be re-integrated into international fold. But that won’t be easy. Despite being a well-wisher, Gomes feels Brazil is reluctant to become economically involved in a country beset by a lack of regulatory transparency, fiscal collapse, currency controls and legal uncertainties. ‘There are no plans for Brazilian oil and power companies to re-enter Venezuela due to sanctions and governance risks,’ she says. ‘No new large-scale Brazilian energy investments (via Petrobras or private groups) have been launched in Cuba or Venezuela so far.’

• Further reading: ‘Is Latin America worth taking a risk on for energy investors?’ Latin America has a wealth of opportunities for wind, solar, hydro and biomass development, despite volatile geopolitical and infrastructure challenges. An experienced international panel examined the investment potential and pitfalls of the continent at International Energy Week. New Energy World Features Editor Brian Davis reports.
• Flaring emissions from global upstream oil and gas production activity increased by 7% from 2022 to 2023, reversing earlier progress made in cutting such emissions, according the latest analysis by Rystad Energy. It reports that upstream activities emit about 1 Gt/y of CO₂ in total. Flaring contributed around 30% of those emissions in 2023, assuming 98% flaring efficiency on average.