The U.S. shale boom is losing steam, making Venezuela’s vast reserves attractive to some U.S. oil companies. – MarketWatch/Rystad ShaleWellCube, iStockphoto
The shale oil revolution that transformed the United States into the world’s largest oil producer is entering a new phase – one in which the United States’ hard-won leadership in energy could be eroded in less than five years as oil production growth tapers off.
The question is simple. Shale well production is declining rapidly. On average, a well produces about 80% of total production in the first two years, while typical new well production in the Permian Midland Basin drops by nearly 90% after three years, according to the American Petroleum Institute.
In other words, maintaining production requires constant drilling and reinvestment.
With production growth expected to plateau by the end of the decade, U.S. energy companies are increasingly considering longer-lived supply sources.
Rebecca Babin, managing director at CIBC Private Wealth, said growth in a crude oil price environment of $60 to $80 a barrel has slowed compared with the past 15 to 20 years.
This dynamic “naturally leads companies to look beyond domestic shale,” she said.
Babin said Venezuela stands out because of the size of its reserves and the characteristics of its crude oil, which sets it apart from many other basins around the world.
– API, Rystad ShaleWellCube
The United States may be the world’s largest oil producer, but much of that output is light, sweet crude oil that many domestic refineries are not optimized to process efficiently.
Venezuela’s oil, by comparison, is a viscose, high-sulfur crude — closer to the grade that many Gulf Coast refineries were originally designed to handle. This compatibility makes Venezuelan oil commercially attractive to U.S. refiners.
What is unfolding is a mature shale system. The most productive areas tend to be drilled first, and as prime sites are exhausted, companies face higher costs and lower returns. Jay Young, founder and CEO of King Operating Corp., said when crude prices weaken, drilling activity slows down faster than during boom times.
However, Babin said any new moves into Venezuela would “depend heavily on social, legal and political conditions.” “If these barriers become more favorable, then the company will certainly actively evaluate this area as part of its broader long-term growth strategy.”
Babin said energy independence has been a defining feature of the U.S. economic story over the past two decades. In 2019, the United States became a net energy exporter—that is, exporting more than it imports—for the first time since 1952, and oil production hit a record high in 2025, according to the U.S. Energy Information Administration.
Much of this growth has come from unconventional drilling, including hydraulic fracturing and horizontal drilling of geological formations such as shale.
Rich Tabaka, president of independent oil and gas company Allied Resource Partners, said producers can use existing acreage to offset rapid declines in production from shale drilling (i.e., “squeezing more oil out of areas that are already drilled”). But “it felt like bankruptcy because shale oil production immediately fell off a cliff,” he said.
Still, for companies looking for larger, longer-lived reserves, international projects can play a role.
“Venezuela is definitely an important option over a multi-year horizon” because of its vast oil reserves, Tabaka said.
King Operating’s Young said recent U.S. licensing activity related to Venezuelan oil has created a potential avenue for limited investment. This could create an avenue for investment.
The U.S. Treasury Department issued new and revised general licenses on February 10 that are expected to help make energy exploration and production in Venezuela easier, including “authorizing certain activities involving Venezuelan-origin oil.”
However, Yang said rebuilding Venezuela’s energy sector would be a “multi-year, multi-billion dollar project” that would require stable rules, contract enforcement and clear sanctions. “Energy doesn’t move according to a neat calendar,” he said. “Venezuela may contribute meaningful supply over time, but this is not a switch that will replace declining shale oil production on time.”
Political risk remains a major obstacle. Darren Woods, chairman and chief executive of Exxon Mobil Corp.
Professor Steve Hanke, an applied economist at Johns Hopkins University, agrees that Venezuela remains unattractive to most major producers, citing long-term political and policy instability.
While the interim authorities have moved to loosen some restrictions on private investment, Secretary of State Marco Rubio acknowledged before a Senate committee last month that additional reforms may be needed to attract significant investment.
Market conditions complicate the outlook, with U.S. benchmark West Texas Intermediate crude CL.1 2025 down nearly 20% to trade near $63 a barrel, while global benchmark Brent crude BRN00 trades near $68 a barrel. Analysts say a sustained sub-$60 price environment will put pressure on U.S. onshore producers and discourage capital investment, especially in high-risk areas.
Matthew Bernstein, vice president of oil and gas for North America at Rystad Energy, said a price environment below $60 would not be “a market where companies are looking to deploy significant amounts of capital, particularly investing in projects with uncertain returns.”
Bernstein said large producers were unlikely to quickly commit to rebuilding Venezuelan output given portfolio constraints and capital concerns.
Bernstein believes that amid the uncertainty, the companies most likely to be more interested in entering the Venezuelan market will be those outside of large-cap and specialty firms.
He said he has seen some interest from “private equity, private investors with higher risk tolerance and different business models.”
Currently, U.S. shale oil remains the backbone of U.S. oil supplies. But as growth slows and global dynamics change, companies may find that the next chapter in energy security looks less straightforward than it did in the past 25 years.
