Markets May Be Wrong About The Risks Of Venezuela & Greenland

Authored by Daniel Lacalle, 

Most of the recent reports about the potential opportunity in Greenland and Venezuela focus on the large capital expenditure required, technical challenges, and legal security risks. However, markets may exaggerate the risks and underestimate the potential.

It is interesting to read that the United States should not invest in Venezuela and Greenland because they are high-risk, low-potential areas, but the same analysts find no problem in China and Russia developing those resources.

The oil market will likely lose most of its geopolitical risk premium with Venezuela’s transition to a transparent democracy and a possible regime change in Iran. Adding the development of Greenland may have the same effect that the shale revolution had. The potential of lower gas prices and tech disinflation, higher investment, and more transparent price formation is significant.

The world does not have resource scarcity. It has legal and regulatory excess. In fact, most of the limitations in Greenland and Venezuela are legal and regulatory, more than technical, even if the technical aspect may include some challenges. Deregulation and a transparent legal framework are key to unlocking the enormous potential.

Greenland is undeniably a high-return mining opportunity. The Malmbjerg Molybdenum project offers an estimated 33.8% IRR with $1.17 billion Net Present Value on $820 million capital expenditure. All the feasibility studies have been completed, the permitting is done, and it is just a question of taking the decision to act. The Tanbreez rare earth project offers an exceptional 180% estimated IRR with around $3 billion NPV on just $290 million capex. Similar economics can be found in its graphite & gold resources. Manageable capital expenditure and a return on invested capital that comfortably exceeds the weighted average cost of capital with rapid payback periods.

In oil and gas, the Greenland opportunity finds more legal and regulatory resistance, but the returns may be significantly higher. Greenland holds very large but still unproven oil and gas resources, with technically attractive volumes but slightly more challenging economics due to government policy.

A USGS Circum‑Arctic assessment estimates mean undiscovered conventional resources in the East Greenland Rift Basins at about 31.4 billion barrels of oil equivalent (oil, gas, and natural gas liquids). The Greenland government mentions a separate West Greenland/Baffin Bay assessment with a mean resource of more than 18 billion barrels of oil equivalent. Independent basin studies for onshore Jameson Land suggest around 4 billion barrels of unrisked recoverable oil, with about 1.2 billion barrels targeted by the first two planned wells. Onshore blocks are less expensive and logistically safer than deep‑offshore Arctic projects. Analysts highlight that even a significant discovery would likely carry high break-even prices due to Arctic logistics, absence of infrastructure, export‑terminal requirements and harsh operating conditions. Different independent analyses show breakeven oil prices at $75/bbl and IRRs of 13%. However, the inflated cost estimates come mostly from the estimates of small independent exploration companies, not from more efficient and cost-effective majors.

The problem in Greenland is not navigating the technical challenges and reducing costs but government interventionism. In 2021, the government stopped issuing new oil and gas exploration licenses, citing climate-related reasons. This limits the potential, as there is little option of improving costs via economies of scale and major player involvement. Many other areas with technical challenges have proven to be economically viable at $60 a barrel with a better combination of cost structures and engineering economies of scale.

​Greenland suffers a policy paradox. Legal licenses exist, but an overtly anti‑oil stance and strong so-called environmental scrutiny have made investor confidence The challenges posed by Arctic logistics and infrastructure limitations primarily stem from the difficulty of installing large-scale operations, which discourages oil companies from making productive investments. cost-efficient systems. Litigation, regulatory animosity, political opposition, and permitting delays are the main problems. Greenland’s undeniable oil and gas opportunity can be unlocked with a solid program of environmentally respectful and technically efficient investments where major players can leverage economies of scale and find the technical solutions to reduce costs.

Analysts’ estimates of high costs in Greenland are made with a static view of the industry, which has proven to be able to slash expenses and boost productivity numerous times in equally challenging areas.

The case in Venezuela is also very attractive and only limited by legal and political insecurity.

Venezuela’s oil production has plummeted from 3.5 million barrels per day to less than a million due to the dictatorship’s plundering of PDVSA, the national oil company, and abandoning productive investment. The Maduro regime weaponized PDVSA to make it a cash machine for its political spending, financing of dictatorships, and making the leaders of the regime rich.

A speedy recovery of 500 thousand barrels per day is relatively easy and would require Chevron’s four joint ventures to currently produce around 200 kb/d, which accounts for about 22–25% of total Venezuelan output, and this figure could increase by 50% in less than a year and a half by simply leveraging existing resources. Productive capacity of existing fields would require the intervention of the main service providers to solve the leaks and revamp the technically outdated infrastructure.

Adding one million barrels per day to the country’s output would require a maximum of $70 billion of capital expenditure. However, restoring to 2018 levels only needs $20 billion. In fact, once legal, regulatory, and safety hurdles are lifted, companies may find that the cost is substantially lower.

Many existing projects in Venezuela could raise production and improve project‑level IRRs once political risk, legal limitations, and contracts normalize. Petropiar, in the Orinoco Belt, is currently at 50% of capacity because the upgrader did not have major maintenance in six years as the government corruption and interventionism soared. With full maintenance and recovery, production can double from current levels. The Petroboscán project in Lake Maracaibo can easily increase production by 40% through workovers and incremental recovery technology.

In Venezuela’s main projects, infrastructure and wells already exist. Therefore, adding incremental production from infill drilling, artificial lift, and maintenance is relatively fast with low additional costs, which could double IRRs rapidly.

Chevron’s four joint ventures currently produce around 200 kb/d, about 22–25% of total Venezuelan output, and this figure could increase by 50% in less than a year and a half “just leveraging what’s on the ground,” which means high‑return, short‑cycle investments in maintenance and debottlenecking, according to the company.

The Junín and Carabobo projects are older development plans (Junín 2, 4, 5, 6 and Carabobo 1–3) that can produce between 200 and 450 kb/d for each block, but progress has stalled due to corruption, insecurity, and the country’s financial problems.

A 2025 Energy Analytics Institute (EAI) report estimates that six major heavy-oil projects would need about $47.4 billion in investment and could increase production capacity by around 2.1 million b/d, showing the large amount of production that could be restarted if conditions become safe, clear, and appealing. Venezuela currently has four upgrading units, but only one (at Petropiar) is operational. Therefore, the implementation of new or restored upgraders is crucial for rapidly increasing Orinoco crude production.

The most attractive return and the best way to recover the economy of Venezuela come from rehabilitating existing joint ventures and partially built Orinoco projects, where sunk infrastructure plus large in‑place reserves combine to provide small incremental capex and large production increases, according to the EAI report.

The recovery of Venezuela’s oil industry can generate significant benefits for the nation and its citizens once a transparent system of ownership, royalties, and legal framework is implemented. Venezuela will, therefore, need to implement a system like what Milei has created for Argentina, the RIGI framework, designed to provide legal and investor security for large-scale international investments. The Venezuela investment opportunity must be syndicated and implemented through consortiums to accelerate the capital deployment and maximize the output improvement.

The Venezuela opportunity for the world is enormous. It has the world’s largest crude reserves, and a new government that guarantees international arbitration, transparent and solid contracts and a hydrocarbon law reform can also create tens of thousands of jobs directly and indirectly, strengthening the domestic supply chains, bringing back the more than 18 thousand technical experts the Maduro regime dismissed, and restoring PDVSA’s management and workforce to incorporate credible professionals instead of political figures.

The Venezuela opportunity offers an average 20% IRR at current oil prices once the initial restoration phase is completed. Decades of underinvestment and political dysfunction can be solved rapidly with decisive actions and technical skill. In five years, Venezuela can double current production levels and lead to an economic recovery that requires restoring private property security and eliminates the dictatorship’s parallel administrations and opaque agreements.

A more stable post‑Maduro setting can give results quickly and start a multi-year process of unlocking investment and recovering production. A Breakwave Advisors special report shows that a recognized government and market reintegration can allow production to trend back toward historic peaks (around 3.5 mbpd). Wood Mackenzie highlights that with regulatory clarity and access to capital, Venezuelan supply could become a significant medium‑term growth source for refiners configured to heavy crude. An Energy Policy Research Foundation (EPRINC) technical report says that, with “proper investment,” Venezuela could sustain roughly 2.5 mbpd over 20–30 years, highlighting scope for production growth using horizontal wells, artificial lift, and other secondary recovery technologies.

In Venezuela, less than $10B dedicated to productivity technologies in specific heavy‑oil projects could double recovery factors over a 5-year period, showing +20% IRR project‑level economics relative to reserves in place.

Can it be done quickly? An Atlantic Council study highlights that licensing and contract reforms letting existing operators expand, plus new and transparent participation contracts, could add 500–600 thousand barrels per day in 12–18 months.​

The only reason why analysts see the current challenges as insurmountable is because it seems difficult to believe that the legal and investor security framework will change drastically to an investment-friendly and transparent system.

What Greenland and Venezuela show is that the enormous resource and development opportunities may have technical challenges, but those are easily solvable once the legal and regulatory framework changes from a corrupt and unstable system, in Venezuela, or an interventionist one, like Greenland, to a political and regulatory system focused on facilitating investment and looking for solutions, not creating problems.

Once politics stop interfering, investment will thrive. If you want respect for the environment, economic development, and sustainability, you should trust engineers, not politicians.