Explainer: Venezuela, Greenland, implications for Canada’s future

A Syncrude oil sands mining facility near Fort McKay, Alta., in September 2022. Venezuelan oil is a similar grade to that from Canada’s oil sands. (Ed Jones / Getty Images)

Global energy geopolitics are rapidly reshaping markets and national strategies throughout the Western Hemisphere. 

Venezuela’s potential reemergence as a major oil producer has recently renewed the U.S. interest in strategic resources, including those in the Arctic. Combined with increasing pressure on Canada to diversify its energy exports, these shifts mark a pivotal moment for Canadian energy policy.

Venezuela’s possession of the world’s largest proven oil reserves is central to this shift. 

In an interview with NBC News, U.S. President Donald Trump stated that American oil companies could restore Venezuela’s oil sector to operational status within 18 months or less, although he acknowledged that this would require substantial investment. 

Trump further asserted that increased Venezuelan production would benefit the U.S. by stabilizing or reducing oil prices.

Venezuela is estimated to possess over 300 billion barrels of oil, representing approximately 17 per cent of global reserves, in contrast to Canada’s 10 per cent. 

Despite this substantial resource base, Venezuela’s oil industry has suffered from prolonged sanctions, mismanagement and underinvestment. 

Canadian energy stocks declined following Trump’s remarks, reflecting investor concerns that renewed Venezuelan supply could compete with Canadian exports to the U.S.

Potential scenarios for the future of Venezuelan oil

According to Gonzalo Escribano, head of the Energy and Climate Programme at the Elcano Royal Institute, Venezuela’s oil future can be understood through three broad scenarios.

The most optimistic scenario involves a legitimate, democratically elected government emerging from the disputed 2024 election and launching deep reforms. 

Under this model, the state oil company PDVSA would be depoliticized, transparency would improve and the sector would reopen to foreign investment while preserving national control over resources. 

Sanctions would be lifted, allowing Venezuela to quickly release up to 50 million barrels of stored oil. Production could rise by 200,000 barrels per day within months and by 300,000 to 500,000 barrels per day by 2027, with long-term potential reaching three million barrels per day by 2040 — but only with massive investment and political stability.

A second scenario envisions a U.S.-aligned recovery, wherein Washington exercises strict control over which foreign companies are permitted to operate in Venezuela.

Although production would likely increase under this arrangement, Escribano cautions that it could undermine Venezuela’s energy sovereignty and long-term development. Democratic reforms may be postponed, competition restricted and the benefits to Venezuelans diminished.

The third and most pessimistic scenario is prolonged instability. Continued political uncertainty, sanctions and unclear reform pathways would deter investment and potentially deepen production decline. While this outcome would limit Venezuela’s impact on global supply, it would prolong economic hardship and regional instability.

Canada’s position and economic context

Canada has taken a firm political position on Venezuela. 

On Jan. 3, Prime Minister Mark Carney communicated in an official statement that Canada has not recognized Nicolás Maduro’s government since the stolen 2018 election and condemned the regime’s human rights abuses, corruption and violations of international law. 

Carney reaffirmed Canada’s support for a peaceful, Venezuelan-led transition and emphasized respect for sovereignty and democratic legitimacy.

Economically, Canada confronts a more complex reality. Nearly 97 per cent of Canadian oil exports, valued at approximately $100 billion in 2023, were directed to the U.S. 

Although Carney has stated that increased Venezuelan production is unlikely to significantly harm Canadian producers, he acknowledged the necessity of reducing reliance on a single export market.

Ottawa has therefore emphasized export diversification, particularly through a proposed pipeline to the Pacific coast that would allow Canadian oil to reach Asian markets and remain competitive in the medium and long term.

Expert caution and political pressure

Some analysts urge caution against panic. 

Heather Exner-Pirot, director of natural resources, energy and the environment at the Macdonald-Laurier Institute, said fears of a Venezuelan supply surge are likely short-lived, noting that ongoing instability makes the country a difficult environment for sustained investment. 

Derek Holt, vice-president and head of capital markets economics at Scotiabank, warned that analysts may be “getting way ahead of themselves” in predicting a flood of new supply that would overwhelm Canada’s oil industry.

Still, both agree on one point: Canada’s reliance on the U.S. market is a vulnerability. 

Exner-Pirot has argued that the U.S. is no longer a reliably predictable customer, reinforcing the need for Canada to diversify exports regardless of what happens in Venezuela.

That debate has become politically charged. 

In late November, Ottawa signed a memorandum of understanding with Alberta, which opens the door to a potential pipeline to the Pacific Coast. The project faces significant obstacles, including opposition from British Columbia and unresolved concerns from First Nations. 

Alberta has until July 1, 2026, to submit a formal proposal.

Conservative Leader Pierre Poilievre has increased pressure on Carney, calling for immediate approval of a Pacific pipeline to move millions of barrels per day to overseas markets and reduce reliance on the U.S.

The Arctic and broader energy transition

Beyond oil, global competition is also intensifying in the Arctic. 

Growing attention on Greenland driven by its strategic location, emerging shipping routes and critical mineral deposits, highlights how energy security is expanding beyond crude oil to include geography and future supply chains.

For Canada, whose Arctic territory is central to its sovereignty, these developments reinforce the need to align energy policy with foreign and security policy.

Collectively, Venezuela’s uncertain oil future, assertive U.S. resource policy and intensifying Arctic competition exemplify a broader global energy realignment. 

In an era where energy once again serves as a geopolitical instrument, diversification is not optional but essential to Canada’s economic and strategic future.