AHC: Make Venezuela as rich as Saudi Arabia

As already said earlier in this thread, almost all oil in Venezuela is way shittier than in Saudi Arabia. Nearly all oil reserves in the Orinoco belt are heavy or extra heavy. This means that they don't flow very well at room temperature, and usually can't just be pumped out of the ground like most of the deposits in the Persian Gulf, Texas, ect. and instead need to be heated (i.e. by injecting steam underground) to make them more fluid before they can be pumped. This is fairly expensive. Additionally, the heavier an oil is, the higher its average molecular weight is. Fractions of crude oil with lower boiling points and lower molecular weights like gasoline and kerosene are worth a lot more than higher-boiling fractions like asphalt and bunker fuel for ships. Heavy oils also tend to be high in sulfur and nitrogen, which will make catalysts used in refining useless unless removed. The removal of these elements is usually done by hydrodesulfurization/denitrogenation, which requires large amounts of hydrogen (and a proportionally larger amount of hydrogen with increasing percentage of sulfur/nitrogen). Heavier oils contain less hydrogen than lighter oils, and also cause more physical problems during processes like steam reforming which generate hydrogen than lighter oils.

Venezuela nationalized most of its petroleum industry in the 1970's. Around this time, higher oil prices following the 1973 oil crisis brought a lot of temporary prosperity to the country, and the economy began to become more and more reliant on oil. From 1990 to 1999, non-petroleum industry shrunk from 50% of the country's GDP to only 24%. All of this was taking place even before Hugo Chavez took office in 1999. The Chavez and Maduro administrations began to shift even more heavily towards oil, with 96% of all Venezuelan exports in 2012 being petroleum products. This turned out to be very bad for them in 2014, when oil prices fell by a large amount worldwide. In the years leading up to 2014, the price of West Texas Intermediate (a much lighter and higher quality crude than pretty much anything in the Orinoco belt) stayed fairly constant between about $90 and $110 per barrel, but by 2016 this reached a low of less than $30 per barrel.

This was especially bad for Venezuela, as just the cost of getting heavy crude out of the ground and upgrading it to be equivalent to more conventional crudes costs a pretty large amount of money. Similar problems were faced by other unconventional oil producers, i.e. in Alberta (where oil production fell by about a third in 2016 before recovering), but these were generally in countries not as dependent on oil for revenues, and oil producers were generally given more subsidies to not fire their workers (which the Venezuelan government couldn't really afford). Countries like Bahrain which depend on oil exports were also negatively affected, but to a much lesser degree than Venezuela, since due to lower costs extraction and refining costs for light crude (which is fairly abundant in the Middle East) vs. heavy crude they could still break even at much lower prices than would be necessary for heavy crude.

The real lesson from Venezuela is to not base your entire economy off of one resource, especially when a lot of other countries can produce said resource much cheaper than you ever could. A decrease in the price of said commodity will be extremely bad for said country, regardless of how much their economy is under government control (although for Venezuela, the percentage of the economy owned by the government actually decreased from 35% in 1999 to 29% in 2013, while the Norwegian government currently controls about 35% of the country's economy today). A company that pretty much only got revenue from producing oil, relied nearly entirely on heavy crude, and didn't have large money reserves or the ability to get bailed out by the government would almost certainly have gone bankrupt during after the 2014-2016 decrease in oil prices for the same reason Venezuela's economy collapsed at that time.

In short, Venezuela could never have competed with Saudi Arabia not for any social or political reasons but because of simple geology. It's like asking if synthetic oil production (hydrogenation of coal is, very roughly, comparable to a far more extreme version of heavy oil upgrading) in Germany could have matched Soviet production in the Caucuses, and anyone who ignores the fundamental difference in what kinds of oil are available probably doesn't know too much about what they are talking about. Your only options for this are to either make it so the Saudis never become a major oil producer or to go back tens if not hundreds of millions of years to change what types of organic materials, sediment, ect. get laid down in what will eventually become those countries.
 
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Venezuela’s cost of production, around $20 per barrel, is higher than that of Middle Eastern producers. As far as I know, it cost 4 dollars per barrel to pump oil in Saudi Arabia.
 
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Is it plausible that Venezuela can be as wealthy and prosperous as Saudi Arabia?
Potentially, but it requires them to take certain decisions at the right time. Extracting and selling crude oil – even before the price effectively tripled in the first half of the 1970s – is nice enough but ideally you want to move up the value chain to refining and retail to capture the extra profit, just as PDVSA did with its purchase of Citgo.

At the beginning of the 1970s the Venezuelan government decides to nationalise the oil industry and starts negotiations with the various companies to agree prices. Final numbers are come to based on average profits and oil prices of the past several years to provide a forecast. An autonomous arms length company is founded to manage the industry – essentially PDVSA. When the price of oil jumps a year or two later the government decides to be responsible and create a sovereign wealth fund by diverting half of all oil and gas profits to it with the monies having to be invested abroad. During the recession PDVSA uses some of their new income to buy oil refineries in the US, and later moves into the retail market.
 
Potentially, but it requires them to take certain decisions at the right time. Extracting and selling crude oil – even before the price effectively tripled in the first half of the 1970s – is nice enough but ideally you want to move up the value chain to refining and retail to capture the extra profit, just as PDVSA did with its purchase of Citgo.

At the beginning of the 1970s the Venezuelan government decides to nationalise the oil industry and starts negotiations with the various companies to agree prices. Final numbers are come to based on average profits and oil prices of the past several years to provide a forecast. An autonomous arms length company is founded to manage the industry – essentially PDVSA. When the price of oil jumps a year or two later the government decides to be responsible and create a sovereign wealth fund by diverting half of all oil and gas profits to it with the monies having to be invested abroad. During the recession PDVSA uses some of their new income to buy oil refineries in the US, and later moves into the retail market.
Venezuela had some of the largest oil refineries in the world.

 
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