USGS claims Venezuela sits on Earth’s largest oil reserves

Venezuela may have just become the center of an energy-starved world.

The Orinoco Belt, situated squarely underneath the South American nation, may hold some 513 billion barrels of crude oil, according to a new report by the U.S. Geological Survey (USGS).

That's twice the size of Saudi Arabia's oil reserves, placing Venezuela firmly atop the list of oil-rich nations.

The timing of the USGS announcement is striking. On Jan. 28, international firms will take part in an auction for contracts to drill in the Orinoco Belt. The deadline for auction registration was Jan 18, according to industry publication Petroleum World. Results will be announced on Feb. 10.

However, the USGS did not make an estimate of how much oil is actually recoverable. The Orinoco Belt's reserves are typically thick and tar-like, with some patches difficult to reach with current drilling technology.

"The initial opening of the Orinoco oil belt resulted in a major production boost in the region, but ended in legal controversy, when state-owned Petroleos de Venezuela S.A. took over control of the projects in 2007 under a new hydrocarbons law," a Dow Jones release noted. "ExxonMobil and ConocoPhillips left, starting arbitration proceedings against the country. Chevron, Total and other international companies stayed."

"Knowing the potential for extractable resources from this tremendous oil accumulation, and others like it, is critical to our understanding of the global petroleum potential and informing policy and decision makers," said USGS Energy Resources Program Coordinator Brenda Pierce, in an advisory. "Accumulations like this one were previously very difficult to produce, but advances in technology and new understandings in geology allow us to assess how much is now technically recoverable."

The primary beneficiary of Venezuelan oil is the United States, which consumed 19.5 million barrels of domestic and imported crude per day in 2008, according to the USGS.

Venezuelan socialist leader Hugo Chavez, a longtime antagonist to U.S. political leaders, recently approved construction of a massive oil refinery as a joint venture between state-run Petróleos de Venezuela and China's state-run CNPC. The project, projected to cost some $6 billion USD, would ensure a steady flow to as much as 10 percent of China's oil imports, according to Reuters. China consumed 7.9 million barrels of crude oil per day in 2008, according to the USGS.

The announcement is likely to cause waves in Venezuela's political circles, where oil diplomacy has been a key to the country's global outreach. That the estimate comes from a U.S. firm is also likely to sharpen President Chavez's rhetoric, which has in recent months repeatedly decried U.S. military presence in neighboring Colombia.

As recently as November, 2009, Chavez warned Venezuelans to "prepare for war" with the United States and Colombia, arguing that rapidly expanding defense spending was prudent in the face of such a perceived threat. The U.S. State Department claimed its agreement, settled in August, allows U.S. soldiers to operate drone aircraft from Colombian military bases as a way of prosecuting the drug war.

Shortly after the announcement, Colombia said it would suspend all gas exports to Venezuela. In response, Chavez froze all diplomatic ties with the country.

Ecuador, Bolivia, Brazil and Argentina have also objected to Washington's plan to use Colombian military bases, calling the US military deployment suspiciously large.