With Venezuelan President Nicolás Maduro removed from power, the Trump administration is hoping that its oil resources could benefit the U.S. and other countries. 

David Blackmon, author of the “Energy Additions" Substack and an analyst with more than 40 years of experience in the oil and gas industry, thinks the Texas Railroad Commission, which regulates Texas’ oil industry, could help provide a regulatory framework to get Venezuelan oil flowing into global markets.

Three elements needed to make Venezuelan oil industry viable again

Venezuela’s Orinoco oil belt is believed to hold 513 billion barrels of technically recoverable heavy oil, meaning it can be extracted with today’s current technology. This makes it the largest reserves in the world. The deposit may hold as much as 1 trillion barrels of oil. 

Years of neglect and corruption under former Venezuelan President Hugo Chavez and Maduro, Chavez’s successor, have left the country’s oil infrastructure in a dilapidated state that will require billions of dollars in investment. Venezuela has a history of expropriating oil companies’ assets and leaving them to fight years-long battles to get compensation. 

Trump met with oil executives earlier this month in hopes of enticing them to invest in the country. While some companies are expressing interest in the prospect, others are quite reluctant. 

Blackmon explained on X that there are three “legs” that need to be in place, or efforts to revitalize the Venezuelan oil industry will fail. First, companies will need to know their investments are safe from nationalization risk. 

Secondly, the companies’ employees and assets will need to be kept safe from criminal activity, including theft, extortion and kidnapping. Blackmon said as much as Trump is saying there will be rule of law, companies aren’t persuaded. 

Lastly, Venezuela will need regulatory overhaul to speed permitting and ensure safe, environmentally safe operations. 

“This is where it gets absurdly clear: Venezuela's bureaucracy is a nightmare. Permits drag on forever,” Blackmon said. 

Advising other countries

Blackmon proposes that the Texas Railroad Commission provides a model for a regulatory structure that could benefit Venezuela. The agency was originally founded in 1891 to oversee railroad rates and operations. Starting in 1917, Texas lawmakers handed the agency jurisdiction over pipelines and the production of oil and gas in the state. 

According to the U.S. Energy Information Administration, Texas produces 5.7 million barrels of oil per day, the largest producing state ahead of North Dakota. If Texas were its own country, it would be the fifth-largest producer of oil in the world, and third-largest producer of natural gas. 

Other countries have looked to the commission to try to emulate its success. Blackmon told Just the News that around 2009, when he was a lobbyist in Texas, he was in Austin at the commission’s offices when he encountered people from Poland. That nation had a big shale play it had wanted to develop at the time, and the Polish representatives were there consulting with the commission on how to best regulate the gas field. Poland faced a number of challenges, including a shale geology that is much more difficult to produce gas from than found in the U.S. 

Poland also failed to create a regulatory environment that replicates Texas’ ease of permitting. It can take as little as 48 hours to get a permit to drill in Texas, whereas it takes more than a year on federal lands. 

“They didn't go to Washington, and they didn't go to Colorado. They didn't go to California. They went to Texas to consult with the Railroad Commission, because [Texas has] been doing it longer than anyone else,” Blackmon said. He said some states have copied the commission’s regulations for their own shale development, but not all states. 

“Obviously, California and Colorado have different objectives regarding the regulation of the industry,” Blackmon said.  

OPEC modeled on the commission

The Texas Railroad Commission is said to have provided the regulatory basis for OPEC, of which Venezuela is a founding member. David Prindle, a professor of government at the University of Texas at Austin, wrote a 1981 book titled "Petroleum Politics and the Texas Railroad Commission." In 2020 he told NPR that OPEC was “explicitly modeled on the Texas Railroad Commission.” 

Socialist rule hampered market-based regulations in Venezuela

Blackmon said that when Saudi Arabia was developing its oil fields in the 1930s and 1940s, they looked to Texas’ laws to get an idea about how to regulate the industry. “You had companies coming in from all over the world to develop those oil fields. They didn't have any experience of how to regulate that stuff. And at that time, the railroad commission had far and away the most comprehensive set of regulations to serve as a guide,” he said. 

After years of socialist rule, the prospects of Venezuela adopting market-based regulations for its oil and gas industry are uncertain. Blackmon said that, while the commission offers some guidance, it doesn’t necessarily provide all the answers for Venezuela. 

“I don't think it's a magic bullet by any means, but I think it would certainly help to have some real experts down there who know how to do it the right way,” Blackmon said.