Recent political developments in Venezuela have again brought the country into focus for global oil markets. There is growing discussion around possible easing of constraints on Venezuela’s oil sector and greater engagement with international stakeholders, including the United States. In addition, there have been claims and expectations of improved refinery utilization and higher crude throughput in the country.
While the situation is still uncertain and evolving, it has led some market participants to ask whether Venezuela’s long-idled base oil production assets could also witness a revival. A closer look, however, suggests that the likelihood of a restart of Venezuela’s base oil plants remains low.
A Brief Look Back
Historically, Venezuela did have base oil production capacity. Based on Kline + Company’s Basestocks Intelligence Center data, key assets were identified:
- Cardón refinery, producing Group I base oils with a capacity of around 5.8 thousand barrels per day
- Refinería Isla, with approximately 8.7 thousand barrels per day of base oil capacity, including Group I and naphthenic grades
- Amuay refinery, with about 1.5 thousand barrels per day of Group I capacity
These plants stopped producing base oils several years ago and have remained idle since.
Why a Restart Appears Unlikely
Structural Decline of Group I
All the base oil facilities in Venezuela are Group I base oil plants. Globally, Group I demand has been declining for years due to tighter specifications, OEM requirements, and a steady shift toward Group II, Group III, and synthetics. Any investment into Group I today faces a structurally weaker demand outlook.
Aging and Idled Assets
These base oil units are old and have been idle for a prolonged period. Restarting them would not be a simple switch-on exercise. Significant capital would be required for refurbishment, safety upgrades, and reliability restoration. From an investor perspective, the risk-return equation for such assets may not be attractive.
Adequate Supply From Other Regions
North America already has sufficient base oil supply, particularly in Group I and Group II, to meet regional demand and export requirements. There is no supply gap that Venezuelan base oil production would be needed to fill.
Market Has Moved On
Lubricant blenders have restructured formulations and supply chains over the years to substitute Venezuelan base oils with alternatives. These changes are embedded in approvals, logistics, and commercial relationships, making a reversal unlikely.
Focus on Fuels, Not Base Oils
The current attention on Venezuela’s oil sector appears centered on crude oil production, refinery fuel output, and export revenues. Base oils are a small, non-strategic segment in this context and do not seem to be a priority.
While developments in Venezuela may have implications for crude oil flows and refinery fuel output over time, they are unlikely to alter the status quo for base oils. For lubricant and basestock market stakeholders, Venezuela should be viewed as a geopolitical variable in crude markets rather than a potential source of renewed base oil supply.
Market turmoil and its ripple effects spread across the world increasingly frequently these days. To know whether to pay attention or not, industry stakeholders increasingly rely on partners with deep, longstanding expertise to interpret disruptions and guide strategic responses.
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