Geopolitical Mining · Country & Region Analysis · Venezuela

Venezuela Before, During and After: Oil, Mining and the Unfinished Petrostate

Authors: Marta Rivera | Eduardo Zamanillo

A former OPEC heavyweight, Venezuela is now a test case for whether a collapsed petrostate can rebuild both hydrocarbons and mining under a new political order.

Why this jurisdiction matters now

For much of the 20th century, Venezuela was shorthand for oil wealth: a founding OPEC member, a key supplier to the United States and a textbook petrostate. Its crude powered refineries in the US Gulf and Europe, while oil rents financed an expansive state and shaped the country’s politics.

Two decades of politicised resource management, underinvestment, sanctions and institutional erosion changed that picture. Oil production fell below 1 million barrels per day despite the country holding the world’s largest proven reserves. As formal revenues collapsed, Caracas turned to gold and other minerals, increasingly through informal and illegal channels in the Orinoco Mining Arc.

With the fall of Nicolás Maduro in early 2026, following his capture by US forces and a rapid shift in Washington’s stance, Venezuela faces a rare question:

Can it rebuild not just production, but a different relationship between oil, mining and the state?

For boards and investors, the country is both a warning and a potential reopening: vast oil and mineral endowment, but deep institutional scars and a mining frontier marked by illegality and violence.

Hydrocarbons and minerals: profile and strategic position

Before Chávez: building the petrostate around oil

Venezuela’s rise as a petrostate began long before the Bolivarian era. Commercial oil production expanded rapidly in the 1920s–1940s under foreign concessions. By 1970, output reached roughly 3.7 million barrels per day, about 8% of global supply, placing Venezuela among the world’s largest producers.

In 1976, amid a broader wave of resource nationalism, President Carlos Andrés Pérez nationalised the oil industry, creating Petróleos de Venezuela S.A. (PDVSA). PDVSA was designed as a commercially run national oil company with significant autonomy and the capacity to partner with foreign firms, while the state retained at least 60% equity in joint ventures.

For roughly two decades: PDVSA reinvested in upstream and refining, kept production near 3–3.5 mb/d through the 1980s and 1990s despite OPEC constraints, and became the core source of foreign exchange and fiscal revenue.

Mining, by contrast, played a secondary but non-trivial role. Large-scale iron ore mining began in the early 1950s in the Guayana region under foreign concessions. Production was nationalised in 1975 and consolidated into CVG Ferrominera Orinoco as the sole producer. Venezuela also developed bauxite, alumina, aluminium, coal and gold, with iron ore, aluminium and steel integrated into the state-owned Guayana industrial complex.

By the early 2000s, mineral output included alumina, aluminium, bauxite, coal, gold and iron ore alongside petroleum and gas. In this “before” phase, Venezuela mattered because it combined: large conventional oil reserves, a competent national oil company, and a diversified, albeit modest, mineral base anchored in iron ore and bauxite. The strategic narrative was simple: an energy exporting petrostate whose development model and politics revolved around oil rents.

The 1990s opening: Orinoco heavy oil and a sidelined mining story

By the early 1990s, PDVSA faced declining mature fields and the challenge of monetising the extra-heavy oil of the Orinoco Belt.

The response, under Presidents Pérez and Caldera, was the Apertura Petrolera. The state maintained formal ownership, but opened new projects to international oil companies (IOCs) through association agreements and operating contracts. The goal was to bring in capital and technology to develop the Orinoco Belt and stabilise output from conventional fields.

This model attracted major IOCs, increased investment, and laid the technical foundations for Venezuela’s later reclassification as the holder of the world’s largest proven oil reserves (over 300 billion barrels once Orinoco heavy oil was fully counted).

Mining, however, remained structurally overshadowed:

Iron ore and bauxite production continued, but investment and political attention were focused on oil.
Gold output fluctuated, with a mix of formal and informal operations, but it was not yet the central survival mechanism it would later become.

On the eve of the Chávez era, Venezuela was still a classic petrostate with an oil-centric narrative, even if the seeds of both diversification and vulnerability were visible.

Institutions, policy and social legitimacy: from Chávez to Maduro

During Chávez: politicising PDVSA and neglecting mining

Hugo Chávez came to power in 1999 promising to “reclaim sovereignty” over hydrocarbons and turn oil income into a driver of social transformation.

Three decisions reshaped the sector:

Fiscal tightening and re-nationalisation of risk

The 2001 Hydrocarbons Law raised royalties and taxes, reducing the attractiveness of existing contracts.
In the mid-2000s, the government forced the migration of association contracts into majority PDVSA-controlled joint ventures; firms that refused faced expropriation.

The 2002–2003 PDVSA strike and purge

A major strike at PDVSA, amid escalating political conflict, ended with the dismissal of thousands of employees, including much of the managerial and technical elite.
This created a permanent loss of human capital, as many experienced engineers and managers left the company or the country.

Using PDVSA as a fiscal and political vehicle

PDVSA was tasked with funding social programmes and off-budget initiatives, blurring the line between company and state and weakening corporate governance.

In the short term, high oil prices masked the damage. Output held above 2.5 mb/d in the mid-2000s, but then declined steadily. From over 3.5 mb/d in the late 1990s, production had already started to fall. By the early 2010s, output was clearly on a downward path, even before sanctions.

Mining remained peripheral in the official narrative. State companies in iron ore, bauxite and aluminium suffered from underinvestment and governance problems. Gold mining in the south expanded informally, without a coherent national strategy or regulatory framework.

In summary, the Chávez period was:

an attempt to use oil as a direct instrument of social policy, at the cost of PDVSA’s autonomy, technical capacity and long term investment, while the mining sector drifted into neglect and growing informality.

During Maduro: collapse, sanctions and the turn to gold

Nicolás Maduro inherited a fragile petrostate in 2013. Three shocks deepened the crisis:

Oil price collapse (2014–2016)

Lower prices exposed the depth of fiscal dependence on oil and the weakened condition of PDVSA’s operations.

Institutional erosion and mismanagement

PDVSA’s debt increased, maintenance was deferred and corruption scandals multiplied. Production fell below 1 mb/d by the early 2020s, despite Venezuela holding the world’s largest reserves.
Refineries and pipelines deteriorated, and heavy crude became increasingly difficult and expensive to extract and process.

Escalating sanctions

US sanctions, initially targeting individuals, expanded to PDVSA in 2017 and tightened further in 2019, cutting Venezuela off from key markets and financing channels.
Chevron retained a limited presence through special licences that allowed it to operate joint ventures under strict conditions, largely to recover debt rather than generate new revenue for the government.

As formal oil revenues collapsed and sanctions intensified, Caracas turned increasingly to gold and other minerals as a survival rent.

The Orinoco Mining Arc: between resource base and governance failure

In February 2016, the Maduro government created the Orinoco Mining Arc National Strategic Development Zone, a vast area of around 111,843 km² (about 12% of national territory) south of the Orinoco River, rich in gold, bauxite, coltan and diamonds.

On paper, the Mining Arc was intended to attract investment and diversify away from oil. In practice, it evolved into: a hub for illegal and informal gold mining, a zone of influence for armed groups, criminal organisations and foreign non-state actors, and a source of severe environmental damage and human rights abuses.

Independent investigations converge on the same pattern:

The International Crisis Group describes illegal gold mining in southern Venezuela as causing growing damage to ecosystems and communities, with rising violence and weak state control.
Freedom House and regional NGOs report that illicit mining in Bolívar and Amazonas has accelerated deforestation, polluted rivers with mercury and destabilised Indigenous communities.
OECD linked research and other analyses estimate current gold production in the Mining Arc at 25–32 tonnes per year, much of it unreported and tied to smuggling networks, compared with official figures of just 30 kg in 2023.

In effect, under Maduro: the oil sector collapsed in output and capacity, the state turned to gold and other minerals as a shadow lifeline, often outside formal channels, and the south became a mining frontier of violence, ecocide and informal power, rather than a pillar of a diversified resource strategy.

After Maduro: an opening constrained by history

The events of early 2026, the capture of Nicolás Maduro by US forces and the rapid shift in Washington’s position, have added a new layer to this story.

Recent analysis highlights several features of the emerging post Maduro landscape:

US President Trump has signalled that US oil companies will be invited to help fix Venezuela’s oil industry, framing the country’s vast reserves as an opportunity for American firms.
Reporting by Reuters and others underscores that Venezuela’s oil infrastructure is deeply degraded: production under 1 mb/d, ageing refineries and pipelines, and heavy crude that is costly to extract and refine. Restoring output to around 2.5 mb/d could require US$80–90 billion over 6–7 years under stable conditions.
Analysts in the region argue that the speed and scale of recovery will depend heavily on the nature of the new leadership, legal reforms, contract stability and the sequencing of sanctions relief.

For mining, the picture is equally complex. Venezuela retains significant iron ore, bauxite, coal and gold potential, but output has fallen sharply due to underinvestment and institutional weakness. The Orinoco Mining Arc remains both a potential resource base and a symbol of environmental and governance failure.

Key questions for any post Maduro administration include:

Will the Mining Arc be restructured, reduced or dismantled?
How will new authorities tackle illegal mining, mercury contamination and the presence of armed groups?
Can future mining policy embed strong safeguards for Indigenous rights and ecosystems while still attracting capital?

The after is therefore not a clean slate. Venezuela inherits a vast but degraded oil system, a mining frontier marked by illegality and violence, and a society deeply shaped by decades of petrostate politics.

Fault lines and signals to watch

From a Geopolitical Mining perspective, Venezuela’s trajectory can be read as three overlapping arcs:

Before: a textbook petrostate with underused mining potential

High oil output, a technically capable NOC and meaningful but secondary mining in iron ore, bauxite and gold.
The strategic error was not only dependence on oil, but the failure to build robust institutions around both oil and mining when revenues were abundant.

During: politicisation, collapse and the gold refuge

Under Chávez and Maduro, PDVSA became an instrument of political and social policy, at the expense of reinvestment and technical capacity.
Sanctions accelerated a collapse already underway, while the Mining Arc turned gold into a survival rent extracted through informal, often violent networks.

After: an opportunity constrained by history and geology

Post Maduro, Venezuela can in principle attract capital back into oil and mining. But:
the oil on offer is heavy and costly,
the infrastructure gap is wide,
legal and institutional credibility will take years to rebuild, and
the south bears the scars of an illegal mining boom that cannot simply be reversed.

For investors, boards and policymakers, key signals to watch include:

The design of the new hydrocarbons and mining frameworks: contract models, fiscal terms, and the degree of protection for existing and future investments.
The future of the Mining Arc: whether it is formalised under stricter rules, downsized, or used as a quick fiscal fix.
The pace and conditionality of sanctions relief and how it is sequenced with governance reforms.
The degree to which new authorities separate PDVSA and state owned mining firms from day to day politics, restoring technical capacity and financial discipline.

What Venezuela reveals about the role of the state

Beyond ideological labels, Venezuela is a reminder of how delicate the balance is between state intervention and state facilitation in long-cycle resource industries.

Oil and mining are not simple cash machines. They are capital intensive systems that depend on:

very long timelines from exploration to production,
complex infrastructure – pipelines, refineries, ports, power, haulage – that must be maintained and renewed over decades, and
dense technical and managerial know-how that is hard to rebuild once it is lost.

In Mining Is Dead. Long Live Geopolitical Mining, we argue that the state’s most strategic role is to set the rules, align incentives and provide predictability, not to substitute itself for operators or to run day to day industrial decisions. Venezuela shows what happens when that line is crossed: PDVSA was turned into an instrument of short term politics, the professional management layer was purged, and thousands of skilled workers exited the sector. The result was not only lower output, but a slow degradation of infrastructure and technical capacity that no price cycle could reverse.

This is particularly relevant now that mining is again at the centre of the global agenda, not because it comes back, but because it is finally recognised as the material base of modern life: energy systems, digital infrastructure, defence, transport. In that context, over-intervention by the state carries a double risk:

it erodes the very technical and institutional capabilities that keep complex assets running, and
it prevents countries that are rich in oil and minerals from ever maximising their potential in a way that is fiscally robust and socially legitimate.

Venezuela is therefore not just a story about a specific political project. It is a structural cautionary tale about how easily a resource rich country can fall below its own possibilities when the state stops being a facilitator of long term investment and becomes an unstable operator inside the industry it is meant to regulate.

Resources

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U.S. Geological Survey. (2022). The mineral industry of Venezuela. In 2019 Minerals Yearbook (Vol. III, Area reports: International). Reston, VA: U.S. Geological Survey.
Organisation for Economic Co-operation and Development. (2021). Gold flows from Venezuela: Supporting due diligence on the production and trade of gold. Paris, France: OECD.
United Nations Office on Drugs and Crime. (2025). Minerals crime. Vienna, Austria: UNODC.
International Crisis Group. (2025). A curse of gold: Mining and violence in Venezuela’s south. Brussels, Belgium: International Crisis Group.
United States Department of State. (2025). Report to Congress on the state-sponsored extraction and sale of gold from Venezuela’s Orinoco Mining Arc, and from national reserves in Venezuela such as Canaima National Park. Washington, DC: U.S. Department of State.
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Human Rights Watch. (2025). World Report 2025: Venezuela. New York, NY: Human Rights Watch.
Brookings Institution. (2022). Venezuela’s gold: Ten ways to address illicit financial flows from the mineral trade. Washington, DC: Brookings Institution.
FACT Coalition. (2025). Addressing illegal gold mining and illicit financial flows in the Western Hemisphere. Washington, DC: FACT Coalition.
Coalition Against Illegal Mining in the Amazon. (2025). Climate change, illegal mining, and human rights in the Amazon basin. São Paulo, Brazil: CMIA.