United States Government Accountability Office

GAO Report to the Chairman, Committee on 

Foreign Relations, U.S. Senate 

ENERGY SECURITY

Issues Related to 

Potential Reductions 

in Venezuelan Oil 

Production 

June 2006 

 

GAO-06-668 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

June 2006

ENERGY SECURITY

Issues Related to Potential Reductions in 

Highlights of GAO-06-668, a report to the Venezuelan Oil Production 

Chairman, Committee on Foreign 

Relations, U.S. Senate 

Venezuela is the world's eighthlargest oil exporter and among the 

top 10 countries in total proven oil 

reserves. Venezuela also supplies 

about 11 percent of current U.S. 

imports of crude oil and petroleum 

products and wholly owns five 

refineries in the U.S. Consequently, 

Venezuela is a key player in the

future energy security of the United

States and the world. 

The current global oil market is 

tight and may be more susceptible 

to short-term supply disruptions 

and higher and more volatile

prices. Recently, tension between 

Venezuela and the United States

has caused concern about the 

stability of Venezuelan oil supplies. 

On several occasions, Venezuela’s

President has threatened to stop

exporting oil to the U.S. or to close 

Venezuela’s U.S.-based refineries. 

In this context, GAO analyzed: (1) 

how Venezuela’s crude oil 

production and exports of crude oil 

to the U.S. has changed in recent

years, (2) the potential impacts of a 

reduction in Venezuelan oil exports 

to the U.S., and (3) the status of

U.S. government programs and

activities to ensure a reliable 

supply of oil from Venezuela. 

Commenting on a draft of the 

report, the State and Commerce

Departments generally agreed with

the report, but DOE contended that

the report presents an “alarmist 

view” of U.S. energy security. We

disagree and believe the report 

presents a contextually balanced 

treatment of the issue. 

Venezuelan oil production has fallen since 2001, but exports of crude oil and 

petroleum products to the United States have been relatively stable—except 

during a 2-month strike in the winter of 2002–2003, during which the oil 

sector was virtually shut down and exports to the United States fell by about 

1.2 million barrels. Energy Information Administration data show that total 

Venezuelan oil production in 2001 averaged about 3.1 million barrels per day, 

but by 2005 had fallen to about 2.6 million barrels per day. Following the 

strike, Venezuela’s President ordered the firing of up to 40 percent of 

Venezuela’s national oil company employees. U.S. and international oil 

industry experts told us that the resulting loss of expertise contributed to the 

decline in oil production. In 2005, the Venezuelan government announced 

plans to expand its oil production significantly by 2012, but oil industry 

experts doubt the plan can be implemented because Venezuela has not 

negotiated needed deals with foreign oil companies as called for in the plan. 

A model developed for the Department of Energy estimates that a 6-month 

disruption of crude oil with a temporary loss of up to 2.2 million barrels per 

day—about the size of the loss during the Venezuelan strike—would, all else 

remaining equal, result in a significant increase in crude oil prices and lead 

to a reduction of up to $23 billion in U.S. gross domestic product. A 

Venezuelan oil embargo against the United States would increase consumer

prices for petroleum products in the short-term because U.S. oil refiners 

would experience higher costs getting replacement supplies. A shutdown of 

Venezuela’s wholly-owned U.S. refineries would increase petroleum product 

prices until closed refineries were reopened or new sources were brought on 

line. These disruptions would also seriously hurt the heavily oil-dependent 

Venezuelan economy. 

U.S. government programs and activities to ensure a reliable supply of oil 

from Venezuela have been discontinued, but the U.S. government has 

options to mitigate short-term oil disruptions. For example, activities under 

a U.S.–Venezuela oil technology and information exchange agreement were 

stopped in 2003, in part, as a result of diplomatic decisions. In recent years, 

U.S. oil companies have not sought assistance from the U.S. government 

with issues in Venezuela because the companies do not believe that federal

agency intervention would be helpful at this time. To mitigate short-term oil 

supply disruptions, the U.S. government could attempt to get oil-producing 

nations to increase their production to the extent possible, or could release 

oil from the U.S. Strategic Petroleum Reserve. While these options can 

mitigate short-term oil supply disruptions, long-term reductions in 

Venezuela’s oil production and exports are a concern for U.S. energy 

security, especially in light of current tight supply and demand conditions in 

the world oil market. If Venezuela fails to maintain or expand its current 

level of production, the world oil market may become even tighter than it is 

now, putting further pressure on both the level and volatility of energy 

prices. 

www.gao.gov/cgi-bin/getrpt?GAO-06-668.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Jim Wells at 

(202) 512-3841 or wellsj@gao.gov. 
Contents 

Letter 1

Results in Brief 5

Background 8

Venezuelan Government Actions Have Decreased Crude Oil 

Production, but Exports to the United States Have Changed

Little 13

A Drop in Venezuelan Oil Exports Would Have Worldwide Impacts, 

while Impacts of a Venezuelan Embargo against the United 

States or Closure of Its U.S. Refineries Would Be Felt Primarily 

in the United States and Venezuela 22 

U.S. Government Programs and Activities to Ensure a Reliable 

Long-Term Supply of Crude Oil from Venezuela Have Been 

Discontinued, but the Government Has Options to Mitigate 

Supply Disruptions in the Short Term 28 

Agency Comments and Our Evaluation 37 

Appendix I Objectives, Scope, and Methodology 40 

Appendix II Comments from the Department of Commerce 43 

Appendix III Comments from the Department of Energy 44 

Appendix IV GAO Contact and Staff Acknowledgments 46 

Table 

Table 1: Results of Analyses and Studies of Impacts of a Sudden 

Disruption of Crude Oil Production and Exports 25 

Figures 

Figure 1: Venezuelan Oil Production (2001–2005) 15 

Figure 2: Foreign Company and PDVSA Production of Venezuelan 

Crude Oil, 2001–2005 18 

Page i GAO-06-668 Energy Security
Figure 3: Venezuelan Exports of Crude Oil and Refined Petroleum 

Products to the United States, Excluding the U.S. Virgin 

Islands, 2001–2005 19 

Figure 4: Changes in Wholesale Conventional Regular Gasoline 

Prices in the U.S. Gulf Coast following Hurricanes Katrina 

and Rita 28 

Abbreviations 

DOE Department of Energy 

EIA Energy Information Administration 

GDP gross domestic product 

OPEC Organization of the Petroleum Exporting Countries 

PDVSA Petroleos de Venezuela S.A. 

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Page ii GAO-06-668 Energy Security
United States Government Accountability Office

Washington, DC 20548 

June 27, 2006 

The Honorable Richard G. Lugar 

Chairman, Committee on Foreign Relations 

United States Senate 

The Honorable Richard G. Lugar 

Chairman, Committee on Foreign Relations 

United States Senate 

Dear Mr. Chairman: 

The United States imports about 13 million barrels of crude oil and refined 

petroleum products each day, or about 65 percent of its total daily 

consumption. Venezuela is the world’s eighth largest crude oil exporter 

and supplies about 1.5 million barrels per day of crude oil and refined 

petroleum products, such as gasoline and fuel oil, to the U.S. market, 

comprising about 11 percent of current U.S. imports. In addition, 

Venezuela ranks among the top 10 countries in the world in the size of its 

proven oil reserves—oil that has been proven to exist in the ground and 

could be produced. Venezuela is also one of the founders and an 

influential member of the Organization of the Petroleum Exporting 

Countries (OPEC), whose 11 members control over three-quarters of the 

world’s total oil reserves and can greatly affect world oil prices. 

Consequently, Venezuela is a key player in the future energy security of 

the United States and the world. 

The United States imports about 13 million barrels of crude oil and refined 

petroleum products each day, or about 65 percent of its total daily 

consumption. Venezuela is the world’s eighth largest crude oil exporter 

and supplies about 1.5 million barrels per day of crude oil and refined 

petroleum products, such as gasoline and fuel oil, to the U.S. market, 

comprising about 11 percent of current U.S. imports. In addition, 

Venezuela ranks among the top 10 countries in the world in the size of its 

proven oil reserves—oil that has been proven to exist in the ground and 

could be produced. Venezuela is also one of the founders and an 

influential member of the Organization of the Petroleum Exporting 

Countries (OPEC), whose 11 members control over three-quarters of the 

world’s total oil reserves and can greatly affect world oil prices. 

Consequently, Venezuela is a key player in the future energy security of 

the United States and the world. 

Most of Venezuela’s crude oil that is not consumed domestically in 

Venezuela is exported to the United States. The United States is a natural

market for Venezuelan oil because it is so close—about 5 days by tanker to 

the U.S. Gulf Coast compared to about 30 to 40 days for supplies coming 

from the Middle East. Moreover, Venezuela’s national oil company, 

Petroleos de Venezuela S.A. (PDVSA), wholly owns five refineries in the 

United States and partly owns four other refineries in the United States 

and U.S. Virgin Islands, either through partnerships with U.S. companies 

or through PDVSA’s U.S. subsidiary, CITGO, Inc. These refineries are 

unusual in their capacity to refine large volumes of the heavy, sour (highsulfur) crude oil that constitute a large part of Venezuela’s oil exports. 

Most of Venezuela’s crude oil that is not consumed domestically in 

Venezuela is exported to the United States. The United States is a natural

market for Venezuelan oil because it is so close—about 5 days by tanker to 

the U.S. Gulf Coast compared to about 30 to 40 days for supplies coming 

from the Middle East. Moreover, Venezuela’s national oil company, 

Petroleos de Venezuela S.A. (PDVSA), wholly owns five refineries in the 

United States and partly owns four other refineries in the United States 

and U.S. Virgin Islands, either through partnerships with U.S. companies 

or through PDVSA’s U.S. subsidiary, CITGO, Inc. These refineries are 

unusual in their capacity to refine large volumes of the heavy, sour (highsulfur) crude oil that constitute a large part of Venezuela’s oil exports. 

Political strife within Venezuela and political tension between Venezuela

and the United States have caused concern about the stability of 

Venezuelan oil production and exports to the United States. The election

of Hugo Chavez as President of Venezuela in 1998 signaled a major change

in how the Venezuelan government views the country’s oil industry. For 

example, the government took steps to shift managerial authority for 

Political strife within Venezuela and political tension between Venezuela

and the United States have caused concern about the stability of 

Venezuelan oil production and exports to the United States. The election

of Hugo Chavez as President of Venezuela in 1998 signaled a major change

in how the Venezuelan government views the country’s oil industry. For 

example, the government took steps to shift managerial authority for 

Page 1 GAO-06-668 Energy Security
Venezuela’s oil resources from PDVSA to the Venezuelan Ministry of 

Energy and Petroleum. The government also changed the way it deals with 

foreign companies—it raised the maximum royalty rates paid by foreign 

oil companies from 16-2/3 to 30 percent, established a new “extraction 

tax,” raised income taxes for those companies, and instituted provisions 

requiring joint ownership structures with majority shares for PDVSA. 

Opposition to the new government culminated in a general strike that 

lasted from December 2, 2002, until February 2, 2003, and virtually shut 

down the oil sector of the economy. This strike temporarily decreased 

world oil supplies by about 2.3 million barrels per day, or about 3.0 

percent of total world daily oil supply, and reduced oil exports to the 

United States by about 1.2 million barrels per day—equivalent to about 11 

percent of total U.S. oil imports at the time. More recently, in April 2006,

Venezuela seized two oil fields operated by two foreign oil companies 

because the companies did not comply with new rules unilaterally 

imposed by the Venezuelan government. 

Instability in Venezuela’s oil sector exists in a broader context of a 

tightening global oil supply and demand balance. Surplus global oil 

production capacity—the amount by which oil production could be 

increased immediately without additional investment—was as high as 5.6 

million barrels per day in 2002, but has since decreased to only about 1 

million barrels a day; Saudi Arabia provides most of this surplus capacity. 

Meanwhile, demand for crude oil is growing rapidly in China and other 

countries. Market tightness, along with the fact that much of the world’s 

supply of oil is in relatively unstable regions, may make the global oil 

market increasingly susceptible to short-term disruptions and lead to 

higher and more volatile oil prices. In this context, instability of oil supply 

from any significant individual oil-producing country can create oil price 

volatility, which can cause an economic slowdown. Studies of past oil 

supply disruptions indicate that sudden increases in oil prices can 

contribute to inflationary pressure and economic slowdowns. In extreme 

cases, such as the large oil price increases associated with the Arab oil 

embargo and Iranian revolution in the 1970s, these high prices were 

associated with severe economic recessions. 

Four U.S. government agencies have significant involvement in 

implementing U.S. energy security policy regarding Venezuela. 

• The Department of Energy’s (DOE) Office of Policy and International 

Affairs establishes and implements U.S. international energy policy, and is

responsible for monitoring and analyzing world energy market 

developments and the international political, economic, and strategic 

Page 2 GAO-06-668 Energy Security
factors that influence these developments; managing relevant bilateral 

energy relationships; and ensuring protection of U.S. interests in bilateral

and multilateral treaties and obligations that affect energy services, 

commodities, and technology. Also, according to DOE officials, the office

holds dialogues with energy producers, monitors national and global 

energy security, and serves as the U.S. lead in coordinating oil supply 

disruption-response issues and measures with the International Energy 

Agency. The Office of Fossil Energy works with various countries through 

bilateral agreements to identify areas of mutually beneficial collaboration 

in promoting and developing fossil energy technologies. These agreements 

also facilitate relationships that may lead to commercial development. The 

Office of Fossil Energy also manages the U.S. Strategic Petroleum 

Reserve, which is a U.S. stockpile of about 700 million barrels of light 

crude oil maintained by the federal government for use in the case of a

major disruption of oil supplies to the United States. DOE is also 

responsible for collecting and analyzing data and information through its 

Energy Information Administration (EIA). 

• The Department of State’s Office of International Energy and Commodity

Policy is responsible for coordinating U.S. international energy policy, 

participating in dialogue with energy producers, and monitoring national

and global energy security. The Department of State and DOE, in 

conjunction with other stakeholders, advise the National Security Council 

on energy security issues, including the potential impacts of oil supply 

disruptions on the U.S. economy and on possible actions that could 

mitigate these impacts. 

• The Department of Commerce’s Office of International Trade 

Administration plays a role in advising U.S. business interests seeking to 

invest in Venezuela’s oil sector. 

• The Office of the U.S. Trade Representative and Department of State colead the negotiations of bilateral and multilateral treaties, which may 

contain specific aspects that affect energy security, trade, and investment. 

Until the strike in the winter of 2002–2003, the United States and 

Venezuela had steady diplomatic contacts with respect to oil. Since then,

the relationship between the two countries has become strained. On 

several recent occasions, Venezuela’s President has threatened to stop 

exporting Venezuelan oil and refined petroleum products to the United 

States. He also has made statements regarding the possible sale or closure

of Venezuela’s refinery interests in the United States. Furthermore, 

Venezuelan officials have repeatedly made statements that they are trying

to develop new markets for their crude oil. 

Page 3 GAO-06-668 Energy Security
In the context of effects on U.S. oil supplies, we addressed the following 

questions: (1) How has Venezuela’s production of crude oil and exports of 

crude oil and refined petroleum products to the United States changed in 

recent years, and what are the future prospects? (2) What are the potential

impacts of a reduction in Venezuelan oil exports, a Venezuelan embargo 

on oil exports to the United States, or sudden closure of Venezuela’s 

refineries in the United States? (3) What is the status of U.S. government 

programs and activities to ensure a reliable supply of oil from Venezuela 

and to mitigate the impacts of a supply disruption? 

We used a number of methodological techniques to address these 

questions. To address the first objective, we reviewed studies and analyses

of the Venezuelan oil sector and its history and met with officials of 

numerous U.S. oil companies and other oil companies, industry experts, 

and federal agency officials. In addition, we visited Venezuela and met 

with the U.S. Ambassador and embassy staff; Venezuela’s Minister of 

Energy and Petroleum; PDVSA officials, including the president of the 

company and a number of board members and senior managers; the 

Venezuelan Auditor General; members of the financial community; and 

other individuals with expertise in the Venezuelan oil sector. Both in the 

United States and in Venezuela, we spoke with numerous former PDVSA 

employees, executives, and directors, and oil company officials. We also 

collected, evaluated the reliability of, and analyzed data on Venezuelan 

production, consumption, and exports of oil and petroleum products. The 

sources of our data include U.S. government agencies, especially the EIA; 

the Venezuelan government and PDVSA; and other international and 

private sources. We deemed these data to be reliable for the purposes of 

addressing our objectives. Finally, we reviewed PDVSA’s plan to expand

oil production, and collected oil industry officials’ and experts’ views on 

the likely implementation of that plan. 

Regarding the second objective, we reviewed studies of oil disruptions, 

including studies of the impacts of the Venezuelan strike. We also analyzed 

current conditions in the world oil market to evaluate what might occur if 

a similar disruption occurred today. Further, we evaluated the potential

impacts of several different scenarios involving reductions in Venezuela’s 

oil production or exports to the United States—(1) a sudden and severe 

drop in Venezuelan oil exports from the world market, (2) a sudden 

diversion of oil from the United States to other markets through an 

embargo, and (3) the closure by Venezuela of its wholly-owned U.S.-based

refineries. Regarding the first scenario, we asked a DOE contractor at the

Oak Ridge National Laboratory to use an economic oil-disruption model to 

analyze the impacts of a hypothetical Venezuelan oil disruption on world 

Page 4 GAO-06-668 Energy Security
oil prices and on the U.S. gross domestic product (GDP).1

 For this analysis 

we constructed a hypothetical disruption scenario similar to the one that 

actually occurred during the Venezuelan oil strike in the winter of 2002–

2003, but using assumptions regarding market and economic conditions 

closer to those that prevailed at the time of the analysis (late 2005). We

also analyzed data from private entities and met with numerous industry 

experts in Venezuela and the United States; officials in the Departments of 

State and Commerce; DOE officials; and officials in the International 

Energy Agency to determine the impact of potential oil supply disruptions. 

To address the third objective—identifying the status of programs and 

activities to ensure a continued supply of oil and to mitigate a disruption 

of imports of crude oil and refined petroleum products from Venezuela—

we met with officials at the Departments of State and Commerce, DOE, 

and the Office of the U.S. Trade Representative. We also talked to oil 

company officials. In addition, we spoke with Venezuelan officials and 

U.S. embassy staff in Venezuela. This report focuses on federal programs 

and activities related to U.S. energy security. Diplomatic and political 

actions that may impact U.S. energy security may be undertaken for a 

multitude of foreign policy goals that are beyond the scope of this report. 

Therefore, our assessment of programs and activities related to energy 

security is not an evaluation of the U.S. government’s approach to these 

broader goals. 

To obtain the official Venezuelan government position on questions 

relating to all three objectives, we made arrangements with the 

Venezuelan Embassy in Washington, D.C., for an official spokesperson. 

A more detailed description of the scope and methodology of our review is 

presented in appendix I. We performed our work between March 2005 and

May 2006, in accordance with generally accepted government auditing 

standards. 

Venezuelan oil production has fallen since 2001, but exports of crude oil 

and refined petroleum products to the United States have been relatively Results in Brief 

 1

GDP is a quantifiable measure of a country’s total income for a given year. A sudden loss

of crude oil would, all else remaining equal, harm the economy by increasing petroleum 

product prices, resulting in higher costs and lower employment. However, as will be 

discussed later in this report, the United States and other oil-consuming countries may take

steps to mitigate the impact of a disruption, including using strategic petroleum reserves. 

Page 5 GAO-06-668 Energy Security
stable except during the strike. EIA data show that total Venezuelan crude 

oil production in 2001 (the last full year before the Venezuelan strike) 

averaged about 3.1 million barrels per day, but by 2005 had fallen to about 

2.6 million barrels per day—a 16 percent reduction. Venezuelan 

government officials dispute these figures, and provided data that 

indicates production has almost fully recovered to prestrike levels, but 

most available data indicate that the Venezuelan government data are 

overstated. Following the 63-day strike, Venezuela’s President ordered the

firing of up to 40 percent of PDVSA’s employees, including many of the 

company’s management and technical staff. Experts told us that this loss 

of managerial and technical expertise, along with Venezuela’s 

underinvestment in oil field maintenance since the early 1990s, 

contributed to the decline in PDVSA’s oil production. While overall 

production has fallen, shortly after the strike Venezuela’s exports of crude 

oil and refined petroleum products to the United States returned (and have 

remained) close to prestrike levels of about 1.5 million barrels per day. 

Most of these exports go to CITGO or other refineries on the U.S. Gulf 

Coast that are owned wholly or partly by PDVSA. In 2005, PDVSA 

announced plans to expand its oil production significantly by 2012, but oil

company officials and industry experts expressed doubt about PDVSA’s 

ability to implement the plan, in part because, to date, the company has 

not negotiated any of the numerous deals with foreign oil companies that 

are called for in the plan. The absence of such deals increases the 

likelihood that Venezuelan oil production will continue to fall because, 

given that PDVSA’s own production is in decline, Venezuela needs willing 

foreign oil company partners to maintain the country’s current level of oil 

production.

A sudden and severe reduction in Venezuelan oil exports would have 

worldwide impacts, while the impacts of a Venezuelan oil embargo against 

the United States or closure of Venezuela’s U.S. refineries would be 

primarily concentrated in the United States and Venezuela. 

• A sudden loss of all or most Venezuelan oil from the world market under 

the current tight global supply and demand balance would raise world oil 

prices. For example, a model developed for DOE estimates that a 

disruption of crude oil with a temporary loss of up to 2.2 million barrels 

per day—about the size of the loss during the Venezuelan strike—would, 

all else remaining equal, result in a crude oil price spike of up to $11 per 

barrel in the early stages of the disruption. Such an increase would raise 

the price of petroleum products and, because petroleum products are 

important to the functioning of the economy, would likely slow the rate of

economic growth in the United States and other countries until 

Page 6 GAO-06-668 Energy Security
replacement oil could be obtained. The model also predicted that U.S. 

GDP would decrease by about $23 billion. Because a severe drop in oil 

production would also cause large losses for Venezuela in export revenues 

and jobs, Venezuela would likely try to restore oil production as quickly as 

possible. 

• A Venezuelan oil embargo against the United States would increase 

consumer prices for gasoline and other petroleum products in the short 

term because U.S. oil refiners would experience higher costs getting oil

supplies from sources farther away than Venezuela. Also, some U.S. 

refineries that are designed to handle Venezuelan heavy sour crude oil 

would lose some of their effective capacity if they had to use the lighter 

replacement crude oil that most likely would be available. In this scenario,

because Venezuelan oil would not be taken off the market entirely, the 

impact on world oil prices would be minimal in the long term. The impact

of a U.S.-specific embargo would also be smaller on Venezuela than if its 

total oil production fell.

• If Venezuela shut down its wholly-owned U.S. refineries there would be a 

reduction in the supply of gasoline and other petroleum products—and a 

corresponding increase in prices of these products—until the closed 

refineries were reopened or new sources of refined petroleum products 

were brought on line. The impacts would be obviously most severe in the 

United States and Venezuela, although greater demand by U.S. oil 

companies to buy petroleum products from other countries could cause 

price increases in those countries. Venezuela would suffer direct losses of 

revenues from its U.S. refineries and, if closing the refineries was deemed 

a threat to U.S. national security, Venezuela could potentially face 

sanctions by the U.S. government. 

The U.S. government’s programs and activities to ensure a reliable longterm supply of oil from Venezuela have been discontinued, but the U.S. 

government has options to mitigate short-term oil supply disruptions. DOE 

has had a bilateral technology and information exchange agreement with 

Venezuela since 1980 to enhance oil production in—and secure reliable 

and affordable sources of oil from—that country, but these activities 

ceased in 2003. According to DOE officials, the activities stopped in part as 

a result of diplomatic decisions and in part because Venezuela no longer 

had counterparts to DOE technical staff who could continue the 

cooperative exchanges. In addition, the United States, co-led by the 

Department of State and the Office of the U.S. Trade Representative, 

attempted to negotiate a bilateral investment treaty that would have 

provided rules on investment protection, binding international arbitration 

of investment disputes, and repatriation of profits, and assisted U.S. oil 

Page 7 GAO-06-668 Energy Security
and other companies doing business in Venezuela, but negotiations broke 

down in 1999 because of significant differences between the two 

countries. Officials in many oil companies told us that poor relations 

between the United States and Venezuela had made it difficult to compete 

on new investment opportunities in Venezuela and that a bilateral 

investment treaty would have helped protect their investments in 

Venezuela when the Venezuelan government unilaterally changed the way 

it deals with foreign companies. The U.S. government has options to 

mitigate short-term supply disruptions. It has relied on diplomacy in the 

past to persuade oil-producing countries to increase production, and it 

could use oil from the U.S. Strategic Petroleum Reserve. During the 

Venezuela strike, for example, the U.S. government used diplomacy to 

persuade oil-producing countries in the Middle East and other areas to 

bring spare oil production capacity online and make up for the lost oil. 

However, such diplomacy may be less effective today because there is 

currently very little spare production capacity. In addition, during the 

strike, DOE allowed oil companies that were to deliver oil to the U.S. 

Strategic Petroleum Reserve to delay those deliveries, which increased the 

available oil supply in the United States. Officials in the Departments of 

State and Commerce, DOE, and the Office of the U.S. Trade 

Representative told us that they do not have Venezuelan-specific 

contingency plans for a potential loss of oil; rather, they believe diplomacy 

to persuade oil-producing countries to increase production and using oil in 

the U.S. Strategic Petroleum Reserve are adequate actions to deal with an

oil-supply disruption. Although the U.S. government has options to 

mitigate impacts of short-term oil disruptions on crude oil and petroleum 

products prices, these mitigating actions are not designed to address a 

long-term loss of Venezuelan oil from the world market. If Venezuela fails 

to maintain or expand its current level of production, the world oil market 

may become even tighter than it is now, putting further pressure on both 

the level and volatility of energy prices. In this context, the United States 

faces challenges in the coming years that may require hard choices 

regarding energy sources, foreign relations and energy-related diplomacy, 

and the amount of energy Americans use. 

As the United States has become more dependent on foreign sources for 

crude oil, our energy security has become increasingly intertwined with 

that of other countries. Crude oil is a global commodity and, as such, any 

world event that increases instability in crude oil prices reduces energy 

security for all oil-buying countries in similar ways. Numerous empirical 

studies have shown a correlation between oil price shocks and economic

downturns. When crude oil prices rise, this pushes up prices of petroleum 

Background 

Page 8 GAO-06-668 Energy Security
products. Consumers spend more of their income on energy and less on 

other goods, which can cause an economic slowdown. In addition, since 

much of the oil is imported, there is a greater flow of funds overseas rather 

than increased domestic spending. World oil prices have more than 

doubled since 2003 and are currently higher, when adjusted for inflation,

than in any time since the early 1980s. World demand for oil is projected to 

increase by about 43 percent over the next 25 years—from about 82 

million barrels per day in 2004 to about 118 million barrels per day in 

2030—with much of the increased demand coming from China and other 

countries. Some experts believe oil prices will remain high for the 

foreseeable future as suppliers struggle to increase production to keep up

with demand. In this tight demand and supply environment, even small 

supply disruptions can create large increases in prices. In this way, our 

energy security is tied to events in all oil-producing countries. 

Oil was first produced commercially in Venezuela in the early 1900s, and 

by the late 1920s Venezuela was the world’s second largest producer, after 

the United States. Today, Venezuela’s 78 billion barrels of proven 

reserves—crude oil in the ground that geological and engineering data 

have demonstrated with reasonable certainty is able to be produced using 

existing technology—are the seventh or eighth largest in the world. 

Outside of the Persian Gulf, only Canada’s proven reserves are considered 

greater than Venezuela’s.2

In 2005, Venezuela was the world’s eighth largest exporter of crude oil. 

Most of Venezuela’s crude oil that is not consumed domestically in 

Venezuela is exported to the United States because of its close proximity; 

additionally, Venezuela owns significant refining assets in the United 

States and the U.S. Virgin Islands that can refine its heavy sour oil. In the 

1980s and 1990s, PDVSA bought CITGO, Inc. and acquired interests in 

several other U.S. refineries that had the ability or could be reconfigured 

to refine such crude oil. Today, the refining capacity of PDVSA’s share of 

the nine U.S. refineries in which it has an interest is about 1.3 million 

barrels per day. For example, CITGO’s five wholly-owned refineries have a 

Venezuela Has Been a Key 

Player for Almost a 

Century 

 2

While Canada’s proven reserves include oil sands, which are a low-quality source of oil, 

Venezuela’s extra heavy oil reserves are only partly included in its proven reserves. Many 

industry sources believe that Venezuela probably has extensive reserves of extra heavy oil. 

The Venezuelan government estimates the country has an additional 235 billion barrels of

such crude oil that ultimately will be recoverable. If this estimate is proven, Venezuela’s 

reserves would exceed over 310 billion barrels—the largest of any country in the world.

Page 9 GAO-06-668 Energy Security
refining capacity of about 750,000 barrels per day and market their refined 

petroleum products in the United States through about 14,000 

independently owned service stations using the CITGO name. In addition, 

PDVSA partners directly, or through CITGO, with ExxonMobil, Lyondell, 

ConocoPhillips, and Amerada Hess in the U.S. Virgin Islands. These nine 

refineries buy most of the crude oil and refined petroleum products 

exported by Venezuela. While the United States is unique in its capacity to

refine large volumes of the heavy crude oil that constitutes a majority of 

Venezuela’s oil exports,3

 China and other countries, such as Brazil, have 

plans to build refineries that can process heavy crude oil, which, if built, 

may create other attractive markets for Venezuela’s oil.4

 In addition, the 

Venezuelan government has launched several regional initiatives to 

increase its export base, including (1) PetroCaribe, through which 

Venezuela offers oil and some refined petroleum products to 14 Caribbean 

countries with favorable financing, and (2) PetroAndina and PetroSur, 

which offer oil under similar terms to, respectively, the Andean countries 

of Colombia, Ecuador, and Bolivia and the South American countries of 

Brazil, Uruguay, and Argentina. 

The oil sector in Venezuela consists of a network of oil fields and wells 

that produce crude oil, refineries to process the crude oil, and an 

infrastructure to transport the crude and refined products. The bulk of 

Venezuela’s production comes from the Lake Maracaibo area in the 

country’s western region and from the Faja area in the Orinoco Belt in the 

country’s eastern region. The crude oil is processed by PDVSA’s six 

refineries in Venezuela or is exported to the United States or other 

countries. Crude oil is shipped by way of 39 oil terminals from Venezuela’s 

major oil ports, located in the western and eastern regions of the country.

Foreign oil companies began producing crude oil in Venezuela in the early 

1900s. In 1976, Venezuela nationalized its hydrocarbon industry, bringing 

control of oil—which is the main source of the country’s wealth—under 

the control of the national oil company. However, beginning in 1992, the 

U.S. and Other Foreign 

Companies Have Long 

Been Involved in the 

Venezuelan Oil Sector 

 3

The oil industry uses a “gravity scale” to characterize grades of crude oil. Crude that has a 

higher numerical value is considered light; crude that has a lower numerical value is 

considered heavy; crude that is less than 10 degrees gravity, such as that contained in the

Faja area of Venezuela’s eastern region, is considered extra heavy. Faja oil is upgraded to a 

lighter synthetic oil. 

4

DOE told us that these plans are conceptual and have not been finalized. 

Page 10 GAO-06-668 Energy Security
Venezuelan government reopened its petroleum industry to foreign and 

private Venezuelan oil companies in what was known as the “Apertura.” 

Between 1992 and 1997, Venezuela signed 32 operating service agreements 

to allow 22 private Venezuelan, U.S., and other foreign companies to 

produce oil in fields that were considered, at the time, economically 

marginal or high risk. The purpose of these 32 operating service 

agreements was to allow foreign companies to assist PDVSA in producing 

oil, and the contracts were structured so foreign-company operators did 

not have any rights over the volumes, reserves, or prices of crude oil but 

were reimbursed for their costs plus a service fee for production. The 

Venezuelan government granted the foreign company operators an 

indefinite “royalty holiday” whereby the companies paid no more than 1 

percent royalty on the extracted crude, instead of the maximum of 16-2/3 

percent at the time. 

Also during this period, PDVSA entered into four joint ventures with 

foreign companies, including ExxonMobil, ConocoPhillips, and 

ChevronTexaco from the United States, to produce crude oil in the Faja. 

These joint ventures, whose majority shares were owned by the foreign oil 

companies, were considered high risk at the time, in part due to the 

challenges of producing “extra-heavy” sour oil from the Faja, which is 

among the lowest quality oil commercially produced anywhere in the 

world. Venezuela’s extra-heavy Faja oil has higher density (is “heavier”) 

and has a higher sulfur content than most commercially produced crude 

oil. Commercial production of extra-heavy oil is relatively expensive—

pumping it from the ground requires the use of techniques to improve its 

flow characteristics and readying it for market requires “upgrading” to 

prepare it for final refining. During upgrading, the extra-heavy crude oil is

processed to make it lighter and remove much of its sulfur content. In 

1997, foreign companies began to produce extra-heavy sour crude oil in 

Venezuela’s Faja region, and, by 2005, the four joint ventures were 

producing about 600,000 barrels per day of Faja crude. The projects in the 

Faja also paid only 1 percent royalty instead of 16-2/3 percent. Extra-heavy

crude from the Faja region is also used to produce Orimulsion, a boiler 

fuel that is a mixture of bitumen and water. Orimulsion is marketed 

internationally, especially to China. 

Effective January 2002, a new law governing Venezuela’s hydrocarbon 

industry went into effect. The new law increased maximum royalties from 

16-2/3 percent to 30 percent, and increased the percentage of ownership 

by PDVSA in all operating arrangements with foreign and domestic 

companies to at least 51 percent. In 2005, the Venezuelan government took 

steps to make foreign and domestic companies migrate from the terms of 

Page 11 GAO-06-668 Energy Security
the existing 32 operating service agreements to the terms of the new law. 

Essentially, beginning in 2006, the companies that had been paying no

more than 1 percent in royalty fees under the operating service 

agreements had to pay as much as 30 percent. Also, instead of paying 34 

percent in income taxes as service providers, the foreign companies had to

pay 50 percent as part owners in the joint ventures. If the foreign 

companies did not comply with the new rules, the Venezuelan government 

took control of the operations. While the new rules had not been applied 

to the four joint ventures in the Faja, in March 2005 the Faja projects 

began paying 16-2/3 percent royalties. Also, in May 2006, the Venezuelan 

government established a new extraction tax in addition to the 50 percent 

income tax. According to a Venezuelan spokesperson, the extraction tax is

33.33 percent applied to well production, but royalty fees are deducted 

from this tax. The Venezuelan tax authority also issued bills for millions of 

dollars in back taxes to foreign companies conducting production 

activities under the 32 operating service agreements after the effective 

date of the law. 

The oil industry is capital-intensive and heavily dependent on continuous 

investment to maintain existing wells, establish new wells for crude oil 

production, and develop and maintain the infrastructure supporting the 

production network. According to the EIA, PDVSA is Venezuela’s largest 

employer and accounts for about one-third of the country’s GDP, about 50 

percent of the government’s revenue, and 80 percent of Venezuela’s export 

earnings. PDVSA stated in 2005 that it plans to invest $26 billion to expand 

its oil production to 5.8 million barrels per day by 2012. 

After Hugo Chavez was elected president of Venezuela in 1998, 

responsibility for the oil industry changed. Managerial authority for the 

petroleum industry was shifted from PDVSA to the Venezuelan Ministery 

of Energy and Petroleum; the way Venezuela does business with foreign 

companies also changed, as discussed previously. Domestic resistance to 

the Chavez administration and the changes in hydrocarbon sector 

oversight resulted in a 63-day strike by nearly half of PDVSA workers in 

the winter of 2002–2003. Oil production almost completely stopped, as oil

wells stopped pumping, refineries closed, oil tankers stopped running, and

storage facilities reached full capacity. The strike caused a temporary 

decrease in world oil supplies of about 2.3 million barrels per day, an 

amount equivalent to about 3.0 percent of total world daily oil supply. 

Political Situation in 

Venezuela 

Page 12 GAO-06-668 Energy Security
Venezuela is a founding member of OPEC, which controls about 40 

percent of the world’s estimated 84 million barrels of production. 

Venezuela is the third largest producer within OPEC, according to EIA 

data. OPEC can wield great power in the international oil market, 

particularly by setting production quotas for its member countries to raise 

and lower the supply of oil, thereby influencing world oil prices. During 

the mid-1990s, Venezuela was suspected of weakening oil prices by 

producing above the country’s quota. Since Hugo Chavez became 

President of Venezuela, the Venezuelan government has favored stricter 

adherence to OPEC quotas, and currently Venezuela is considered a price 

hawk in the ranks of OPEC, generally favoring production restraint to 

keep oil prices relatively high. 

Energy security is a national priority for the United States, and the United

States has long had programs and activities designed to foster energy 

security. The United States government also strives to enhance 

cooperation with energy consuming and producing governments to 

mitigate the impact of supply disruptions and to support U.S. and world 

economic growth. The United States is a member of the International 

Energy Agency, an organization comprised of Organization of Economic 

Cooperation and Development countries that was established to cope with

oil supply disruptions and coordinate an international response in case of

a disruption to the global oil supply market. International Energy Agency 

member countries hold about 4.1 billion barrels of oil stocks, and for a 

limited period can release an amount equivalent to 10 percent of global 

demand each day in case of a disruption. 

Venezuelan oil production has fallen since 2001, largely as a result of 

actions by the Venezuelan government. Since that time the production of

Venezuelan crude oil decreased in oil fields operated by PDVSA and 

increased in fields operated by foreign companies, but, as of 2005, 

increased production by foreign companies was not enough to bring total

Venezuelan oil production back to the prestrike level. Despite production

declines, exports of crude oil and refined petroleum products to the 

United States since shortly after the strike have remained close to 

prestrike levels of about 1.5 million barrels per day. The Venezuelan 

government announced plans in 2005 to expand its oil production and 

exports significantly by 2012, but most experts with whom we spoke 

doubted Venezuela’s ability to implement the expansion plan in the near 

term. 

Involvement of 

International 

Organizations 

Venezuelan

Government Actions 

Have Decreased 

Crude Oil Production, 

but Exports to the 

United States Have 

Changed Little 

Page 13 GAO-06-668 Energy Security
Data from EIA, the International Energy Agency, OPEC, and the 

Venezuelan government all indicate that Venezuelan crude oil production 

decreased between 2001 and 2005. For example, EIA data show that 

production decreased from 3.1 million barrels per day to 2.6 million 

barrels per day, reflecting a decrease of about .5 million barrels per day, or 

16 percent. OPEC, International Energy Agency, and Venezuelan 

government data all indicate varying but higher levels of production in 

2005.

5

 While Venezuelan production figures should be the most accurate 

because they have access to all the production data, many oil industry 

officials and experts told us that Venezuelan government figures have been 

overstated.6

 Figure 1 shows production levels for 2001 through 2005 from 

four sources and illustrates the drop in production as a result of the strike 

and the recovery following the strike. 

Venezuela’s Total Crude Oil 

Production Has Fallen 

since 2001, Largely as a 

Result of Venezuelan 

Government Actions 

 5

To make the data comparable, we made adjustments to the sources, as necessary, to 

include crude oil, condensates, and extra-heavy oil, but exclude natural gas liquids. 

Venezuelan government data for 2004 and 2005 are preliminary. 

6

During our review, the Venezuelan government provided many different production

numbers. Some of these numbers changed and some were incomplete or inconsistent. We

used the numbers we believe are most accurate. 

Page 14 GAO-06-668 Energy Security
Figure 1: Venezuelan Oil Production (2001–2005) 

While there are differences of opinion and uncertainty about the accuracy 

of available production data, other data also support a significant decline 

in production. For example, international financial data show that foreign

investment in Venezuela declined between 2001 and 2004. Specifically, net

foreign direct investment in Venezuela was about $3.5 billion in 2001, 

declined to almost zero in 2002, and recovered to about $1.9 billion in 

2004, the last year for which investment data are available. Because we 

were unable to obtain reliable, independent data on specific investment in 

Venezuela’s oil and gas sector, we analyzed total foreign investment in 

Venezuela as a proxy for the condition of the oil sector. Our analysis 

indicates a high correlation between Venezuelan oil production and net 

foreign investments in Venezuela.7

 In addition, experts told us that there is

0 

500 

1,000 

1,500 

2,000 

2,500 

3,000 

3,500 

Organization of the Petroleum Exporting Countries

Venezuelan Ministry of Energy and Petroleum

Energy Information Administration

International Energy Agency

2001 

2002 

2003 

2004 

2005 

Year 

Barrels per day in thousands 

Source: GAO analysis of EIA, OPEC, International Energy Agency, and Venezuelan government data.

 7

We estimated a correlation coefficient of 83 percent between Venezuelan oil production

and net foreign direct investment for1995–2004, which indicates a similarity in the trends in

oil production and net foreign investment in the country. 

Page 15 GAO-06-668 Energy Security
a high correlation between the number of active oil drilling rigs and oil 

production.8

 However, the number of active rigs fell sharply during and 

after the strike and, as of 2005, had not returned to their 2001 levels. 

Specifically, there was an average of 66 active drilling rigs in Venezuela in

2001; the number of rigs fell to as low as 12 during the height of the strike 

in January 2003; and the average increased to 60 in 2005. This provides 

further evidence that Venezuela’s oil production has decreased. 

The Venezuelan government’s firing of thousands of PDVSA employees 

following the strike contributed to the decline in production. The 

government dismissed about 40 percent of PDVSA’s approximately 40,000 

employees, including many management and technical staff. Experts told 

us that the loss of managerial and technical expertise caused a rapid 

decline in the company’s oil production from existing fields. In fact, some 

said that the loss of expertise was so critical that after the strike, PDVSA 

was unable to issue invoices for contractor services. 

Venezuelan officials told us that strikers did deliberate damage to the 

company and that this sabotage accounts for some of their difficulties 

since the strike. PDVSA employees with whom we spoke, some of whom 

were fired and others who resigned, disputed the claims of sabotage and 

said that strikers had originally planned only a two- or three-day strike, but 

that the government shut them out before they could return to work. 

Venezuelan officials acknowledged that the loss of expertise initially 

hampered operations and said that they have been replacing and training

lost workers as quickly as possible. However, many industry experts told 

us that a black list of former PDVSA managerial and technical staff that 

the Venezuelan government will not rehire is limiting Venezuela’s ability to

acquire the necessary staff to meet its production goals. In addition, 

officials from foreign oil companies with operations in Venezuela told us 

that since the strike, PDVSA has become highly politicized and that PDVSA 

officials are often slow to make key decisions, which have complicated 

foreign companies’ decisions to invest in the Venezuelan oil sector. Many 

oil industry officials told us that PDVSA’s lack of managerial and technical 

expertise still remains one of the biggest challenges in continuing 

operations in Venezuela with PDVSA as a partner. In addition, experts told

us that Venezuela had underinvested in oil field maintenance since the 

 8

We calculated a correlation coefficient of 73 percent between Venezuelan production and 

the number of active drilling rigs for 1995–2005, which indicates a similarity in the trends in

oil production and the number of active drilling rigs.

Page 16 GAO-06-668 Energy Security
early 1990s, and that this had contributed to PDVSA’s declining 

production.

Data from EIA, the International Energy Agency, OPEC, and the 

Venezuelan government indicate that, from 2001 through 2005, Venezuelan

crude oil production controlled by PDVSA decreased, while production 

controlled by foreign companies increased.9

 For example, using EIA data 

as the base for total Venezuelan crude oil production, of 3.1 million barrels 

of crude oil produced per day in 2001, PDVSA produced about 2.4 million 

barrels per day (or 77 percent), and foreign companies produced about .7

million barrels per day (or 23 percent). By 2005, these data indicated that 

of 2.6 million barrels produced per day, PDVSA produced about 1.5 million 

barrels per day (or about 58 percent), and foreign companies produced 

about 1.1 million barrels per day (or 42 percent). International Energy 

Agency, OPEC, and Venezuelan government data show similar trends, but 

the relative proportion of PDVSA’s production differs because each of 

these data sources reflects a different total volume of Venezuelan crude oil 

production. All of the data sources indicate that increases in production by 

foreign companies were not enough to totally offset decreases in PDVSA’s 

production, resulting in a net crude oil production loss. Figure 2 shows the 

increase in foreign companies’ production and decrease in PDVSA’s 

production for 2001–2005 using EIA’s figures as the base for total 

production.10

Declines in Production by 

PDVSA Have Been Partly 

Offset by Increases in 

Foreign Oil Companies’ 

Production, but Not by 

Enough to Reach the 

PreStrike Production Level 

 9

Production controlled by foreign companies includes extra-heavy oil produced under joint

ventures in the Faja and oil produced under operating service agreements throughout the

country. 

10We used EIA data to illustrate the reduction in PDVSA’s share of production. All other 

sources show a similar pattern, but the reduction in PDVSA’s share would be somewhat 

less because these sources have varying but higher 2005 production figures than does EIA. 

Page 17 GAO-06-668 Energy Security
Figure 2: Foreign Company and PDVSA Production of Venezuelan Crude Oil, 2001–

2005 

Note: Foreign companies’ production is based on Venezuelan government data, and PDVSA’s 

production is based on EIA data for total production minus the Venezuelan government’s data for 

foreign companies’ production. 

Since shortly after the Venezuelan strike ended, Venezuela’s exports of 

crude oil and refined petroleum products to the United States have 

remained close to the prestrike levels. EIA data show that Venezuelan 

exports of crude oil and refined petroleum products to the United States 

(excluding the Virgin Islands) have fluctuated month-to-month, but prior 

to the strike had averaged about 1.5 million barrels per day. These exports 

reached a low of about .4 million barrels per day during the strike,11 but by 

April 2003 had returned to approximately the average prestrike level. 

Specifically, EIA data show that such Venezuelan exports averaged 

between 1.5 million and 1.6 million barrels per day between April 2003 and 

0 

500 

1,000 

1,500 

2,000 

2,500 

3,000 

3,500 

Controlled by PDVSA (includes orimulsion)

Controlled by foreign companies

2001 

2002 

2003 

2004 

2005 

Year 

Barrels per day in thousands 

Source: GAO analysis of data provided by Venezuelan government and EIA. 

Venezuela’s Exports of 

Crude Oil and Refined 

Petroleum Products to the 

United States Have 

Remained Relatively 

Stable in Recent Years 

 11Exports to the United States decreased from about 1.6 million barrels per day in 

November 2002 to about .4 million barrels per day in January 2003—a decline of about 1.2

million barrels per day.

Page 18 GAO-06-668 Energy Security
August 2005, as shown in figure 3. The EIA data also show that Venezuela 

exports most of its crude oil to the United States. For example, the data 

show that exports to the United States accounted for about 66 percent of

Venezuela’s total exports of crude oil in 2004. Most of Venezuela’s 

exported crude oil goes to refineries on the U.S. Gulf Coast that are owned 

wholly or partially by the Venezuelan government.

Figure 3: Venezuelan Exports of Crude Oil and Refined Petroleum Products to the United States, Excluding the U.S. Virgin 

Islands, 2001–2005 

0 

500 

1,000 

1,500 

2,000 

2,500 

Oct.

Jan. 2003 

Apr. 2003 

Jul. 2003 

Oct. 2003 

Jan. 2004 

Apr. 2004 

Jul. 2004 

Oct. 2004 

Jan. 2005 

Apr. 2005 

Jul. 2005 

 2002 

Apr.

Jul. 2002 

 2002 

Jan. 2002 

Jan. 1998 

Apr. 1998 

Jul. 1998 

Oct. 1998 

Jan. 1999 

Apr. 1999 

Jul. 1999 

Oct. 1999 

Jan. 2000 

Apr. 2000 

Jul. 2000 

Oct. 2000 

Jan. 2001 

Apr. 2001 

Jul. 2001 

Oct. 2001 

Date

Barrels per day in thousands 

U.S. imports from Venezuela

PDVSA strike (12/2/2002--2/2/2003) 

Source: GAO analysis of EIA data. 

Venezuelan government data show that, like exports to the United States,

Venezuelan domestic consumption has remained close to the prestrike 

level—about .5 million barrels per day. Given that Venezuelan crude oil 

production has decreased and Venezuelan domestic consumption and 

exports to the United States have remained relatively constant since 

shortly after the strike, most of the loss of Venezuelan crude oil must have 

been absorbed by decreased Venezuelan exports to countries other than 

the United States. Some oil company officials also told us that in recent 

years there have been smaller amounts of Venezuelan oil available for 

Page 19 GAO-06-668 Energy Security
purchase on world spot markets, which would also indicate that less 

Venezuelan oil is going to non-U.S. markets. Venezuelan officials gave us

data that showed exports to non-U.S. markets were greater than EIA’s 

numbers, but we were unable to verify the Venezuelan data. 

Future Venezuelan 

Production Is Uncertain 

The Venezuelan government announced plans in 2005 to expand its oil 

production to 5.8 million barrels per day by 2012, which is more than 

double the figure reported by EIA for 2005. Some industry experts told us 

that the expansion plan is technically feasible and that Venezuela’s oil 

revenue in recent years has been sufficient to fund the plan. However, 

many oil industry officials and experts expressed doubt about the 

government’s ability to implement the expansion plan in the near term for 

several reasons. 

• According to Venezuelan officials, as of late 2005, no agreements had been 

signed or investments made to start implementing the major oil production 

expansions detailed in the plan; experts told us that, without agreements, 

the plan will face significant delays, at best. The absence of such deals 

increases the likelihood that Venezuelan oil production will continue to 

fall because, given that PDVSA’s own production is in decline, Venezuela 

needs willing foreign oil company partnership to maintain its current level

of oil production. 

• PDVSA has not been able to maintain its own level of oil production in 

recent years. U.S. and international oil industry officials and experts, as 

well as Venezuelan government officials, told us that PDVSA faces 

significant challenges in overcoming the 20 to 25 percent per year rate of

production decline in its mature oil fields. Venezuelan officials and other 

experts told us that Venezuela faces a challenge in overcoming the normal 

decline in productivity of its older fields, especially in the Maracaibo area 

where oil production dates back to the 1920s. 

• Future foreign investment is uncertain given the Venezuelan government’s 

recent decision to unilaterally change its business dealings with foreign 

companies. Beginning in 2005, the Venezuelan administration took steps to 

make private Venezuelan and foreign companies producing crude oil 

under the 32 operating service agreements renegotiate those agreements. 

Essentially, the new agreements increase the maximum royalty from 16-2/3 

percent to 30 percent, increase income taxes from 34 percent to 50 

percent, and give PDVSA at least a 51 percent share of the operations 

covered by the agreement. Oil industry officials and experts have generally 

reacted negatively to the changes in the agreements. Most company 

officials we contacted told us that Venezuela’s move to unilaterally impose 

Page 20 GAO-06-668 Energy Security
new agreements increased their risk and eroded the investment climate in

Venezuela, likely leading to future production declines. Many oil industry 

officials and experts told us that the changes in the foreign company 

participation structure, such as mandating a majority share of the 

operation for PDVSA, pose investment risks and uncertainty for foreign 

companies because the Venezuelan government has ultimate control in 

decisionmaking. When France’s Total and Italy’s Eni oil companies failed

to sign new agreements, the Venezuelan government seized control of 

their operations in April 2006; five other fields were turned over to PDVSA 

after negotiations, according to the Venezuelan spokesperson. Also, 

ExxonMobil and Norway’s Statoil chose to sell their minority stakes in 

smaller fields rather than accept Venezuela’s required changes.

Furthermore, in May 2006, the Venezuelan Congress approved a new oil 

extraction tax. According to the Venezuelan spokesperson, the extraction 

tax is 33.33 percent applied to well production, with royalty fees deducted

from this tax. 

• Venezuela’s decision to spend a significant part of its oil revenues on 

social programs such as education and health care, instead of reinvesting

it in the oil industry, could slow further development of the country’s oil 

sector. Venezuela’s new hydrocarbon law imposes significant social 

commitments on PDVSA. Venezuelan government officials told us that 

they directly spent about $3.7 billion of oil revenues on social programs in 

2004 and about $5 billion on social programs in 2005. This spending was in

addition to money companies paid to the Venezuelan government as 

royalties and income taxes, and therefore reduces the amount of funds 

available for investing in oil production. 

• Future production could be impaired by the Venezuelan government’s 

preference to use national oil companies from developing countries (such 

as China) and other geopolitically strategic countries (such as Brazil) as 

partners to explore and develop new fields in Venezuela, instead of relying 

on experienced international oil companies. Several oil industry officials 

and experts told us that national oil companies generally do not have the 

expertise of the international oil companies to develop heavy oil fields. 

Page 21 GAO-06-668 Energy Security
The potential impacts of a disruption of production and exports of 

Venezuelan crude oil and petroleum products on world oil prices and on 

the U.S. economy would depend on the characteristics of the disruption. 

The greatest impacts would occur if all or most Venezuelan oil were 

suddenly removed from the world market due to a Venezuelan oil industry 

shutdown. A Venezuelan oil embargo against the United States would have 

smaller impacts that would primarily affect the United States. Similarly, if 

Venezuela shut down its U.S. refineries, the impacts would be felt 

primarily in the United States. Venezuela would suffer severe economic 

losses from all three types of disruption, especially a shutdown of its oil 

production.

Given the current tight global supply and demand conditions, a sudden 

loss of all or most Venezuelan oil from the world market, for example due 

to a strike, would, all else remaining equal, result in a marked spike in 

world oil prices and a decrease in the growth rate of the U.S. economy as 

measured by GDP. Because Venezuela’s economy is so dependent on its 

oil sector, Venezuela would likely try to restore oil production as quickly 

as possible following a strike or similar disruption to avoid large losses of 

export revenues. 

A model developed for DOE by a contractor, using a hypothetical oil 

disruption scenario that we developed to resemble the disruption caused 

by the Venezuelan strike during the winter of 2002–2003, predicted that, by

the second month of a disruption, worldwide crude oil prices would 

temporarily increase by about $11 per barrel—from an assumed predisruption price of $55 per barrel to almost $66 per barrel.12 The increase 

A Drop in Venezuelan 

Oil Exports Would 

Have Worldwide 

Impacts, while 

Impacts of a 

Venezuelan Embargo 

against the United 

States or Closure of 

Its U.S. Refineries 

Would Be Felt 

Primarily in the 

United States and 

Venezuela

A Sudden Drop in 

Venezuelan Oil Production 

Would Have Significant 

Worldwide and U.S. 

Impacts 

 12This analysis was done in fall 2005. In consultation with the contractor, we chose a 

starting price for oil of $55 per barrel—lower than the actual price of light oil at the time—

to reflect a composite of light and heavy oil and the fact that future oil price forecasts were 

falling in the medium term. In the event that an actual oil supply disruption occurs, the

predictive power of the model estimate will depend in part on how close the actual starting 

price of oil is to the assumed price in the model. 

Page 22 GAO-06-668 Energy Security
in world crude oil prices would, in turn, drive up prices of refined 

petroleum products. Later, as the lost oil was replaced with oil from other 

sources or production resumed, the price of crude oil would return to the 

previous level. The model further predicted that the temporary increase in

world oil prices caused by a disruption would lower the U.S. GDP by about

$23 billion relative to what it would have been otherwise—about $13 

trillion. A loss of this magnitude for a given year is likely to cause a small 

decline in the growth rate of the U.S. economy, but is unlikely to result in a 

recession. In this analysis, the rate of GDP growth would be about 0.18 

percent less than what it would have otherwise been for the year. 

Our hypothetical disruption scenario lasts only a few months because 

Venezuela, like any other country that is heavily dependent on oil revenue,

is likely to exert a great effort to end any severe disruption of crude oil 

production. The country’s economy in general, and government revenues 

in particular, depend heavily on the revenues that the country obtains 

from petroleum production and exports. For example, oil revenues 

accounted for between 45 and 50 percent of Venezuelan government 

revenues in recent years. A severe drop in oil revenues for more than a few 

months would cripple the economy, resulting in lower economic growth 

and lost jobs; Venezuelan authorities would consider a prolonged oil 

industry shut down as a very grave threat to the government and to the 

country as a whole. Indeed, PDVSA officials told us that they restored 

most of their lost production during the first few months after the strike. 

It should be noted that the model somewhat understates the impacts on 

the United States of a sudden and severe loss of oil from Venezuela 

because it treats any disruption of oil supplies as equal, regardless of the 

location or the characteristics of the lost oil. In other words, the model 

does not differentiate between heavy sour crude oil (such as that 

produced in Venezuela) and any other type of crude oil—for example, 

“Arab Medium” (which is Saudi Arabia’s medium-quality crude oil). Thus, 

the model does not consider the economic cost of replacing, for example, 

100,000 barrels of heavy sour oil with the same amount of lighter, sweeter 

oil.13 In fact, Arab Medium may cost more than some Venezuelan crude oils 

because of its higher quality, and because the transportation cost of a 

barrel of oil from Saudi Arabia is higher than that of a barrel of oil from 

 13Arab Medium was used to help replace lost oil during the Venezuelan strike. However, in 

any disruption, any quality oil may be used to replace lost oil. According to DOE officials, 

“Arab Heavy,” which has qualities closer to much of Venezuela’s crude oil, constitutes the 

bulk of spare capacity in 2006.

Page 23 GAO-06-668 Energy Security
Venezuela. In addition, there may be an economic penalty associated with 

some U.S. refineries’ switching from their normal significant reliance on 

Venezuelan oil to replacement oil from alternative sources. For example, 

one U.S. oil company that refines Venezuelan crude oil ran its refinery 

optimization model for us to illustrate the impact of switching crude oil 

types on its refining costs. Its model showed that replacing a large quantity

of the Venezuelan oil that it uses on a regular basis with oil from Mexico 

and the Middle East would cause a 7 percent drop in the capacity 

utilization of one of its refineries. This would reduce supplies of petroleum 

products, putting upward pressure on consumer prices. 

The DOE contractor who developed the model acknowledged that the 

model does not account for the effects of higher transportation costs or 

changes in refinery capacity utilization caused by switching from one type 

of crude oil to another. He said that higher transportation costs and 

switching crude oil types could result in larger impacts than the model 

predicts, but that the price impact of switching crude oil types is not 

understood well enough to be accurately modeled and is likely to be small.

We also did an analysis of the impact of the same hypothetical Venezuelan 

disruption scenario on world oil price and on U.S. GDP using parameters

developed by EIA to evaluate oil price disruptions. EIA has also done 

similar analyses, including (1) a slightly larger oil supply disruption and (2) 

an analysis of the impacts of the actual Venezuelan strike. The impacts on 

the price of oil are quite close in all the analyses. However, the impacts on 

U.S. GDP vary significantly as a result of differing assumptions about how 

sensitive the economy is to increases in oil prices. DOE officials told us 

that the impact of such a disruption on the U.S. economy would likely fall 

somewhere between the estimates derived in the model and our analysis.

The results of the analyses and studies are shown in table 1.

Page 24 GAO-06-668 Energy Security
Table 1: Results of Analyses and Studies of Impacts of a Sudden Disruption of Crude Oil Production and Exports

Analyses or studies Disruption description 

Temporary impact on

world crude oil prices

(U.S. dollars per barrel) 

Impact on U.S. GDP 

(billions of U.S. 

dollars)

a

DOE contractor model using our 

hypothetical scenario (January 2006) 

Disruption of a maximum of 2.2 

million barrels per day for 6 months

11 ($23)

Our analysis using EIA disruption 

parameters (January 2006) 

Disruption of a maximum of 2.2 

million barrels per day for 6 months

9–13 (2.6–7.5)

EIA analysis using EIA’s own

hypothetical scenario (March 2005) 

Disruption of 2.4 million barrels per 

day for 6 months 

10–18 b

EIA study of actual Venezuelan

disruption in winter of 2002–2003 

Actual disruption of a maximum of 

2.8 million barrels per day 

<10c b

Source: GAO based on Leiby, Paul N. and David W. Bowman, “Disruption Scenarios and the Avoided Costs Due to SPR Use,” Oak

Ridge National Laboratory Working Paper, January 19, 2005; GAO analysis conducted in January 2006; EIA, Impacts of Hypothetical

Oil Supply Disruptions—Venezuela, Mar. 5, 2005 (unpublished); and EIA, Impacts of the Venezuelan Crude Oil Production Loss, by 

Joanne Shore and John Hackworth, Sept. 25, 2003. 

a

Numbers in parentheses reflect reductions in the U.S. GDP from what it would be without a 

disruption. 

b

This analysis did not include impacts on the U.S. GDP. 

c

EIA attributed the $10 per barrel increase to the Venezuelan oil strike and low petroleum inventories.

A Venezuelan Oil Embargo 

against the United States 

Would Have Smaller 

Impacts, Primarily in the 

United States 

An EIA analysis shows (and several industry experts told us) that a 

Venezuelan oil embargo against the United States would have a smaller 

impact on oil prices than a sudden and severe drop in production. The 

impact of an embargo would be smaller because the Venezuelan oil would

go to other destinations instead of being taken off of the world market. 

However, since most replacement supplies are farther away than 

Venezuela, U.S. oil refiners would experience higher costs and delays in 

getting oil supplies; such an embargo would therefore increase U.S. 

consumer prices for gasoline and other petroleum products in the short 

term. Also, as discussed previously, some U.S. refineries that are designed

to handle large amounts of Venezuelan heavy sour crude oil would operate 

less efficiently if they had to switch to different types of crude oil. 

EIA’s March 2005 analysis estimated that a Venezuelan oil embargo against 

the United States would cause the price of West Texas Intermediate crude 

oil (a commonly used benchmark oil) to increase in the short term by $4 to

$6 per barrel from the then-current price of $53 per barrel—an increase of

between 8 to 11 percent, as opposed to the 19 to 34 percent increase 

associated with a sudden and severe loss of oil. The price would rise 

because the embargo would cause (1) higher transportation costs resulting 

from longer distances to transport oil from locations farther away than 

Page 25 GAO-06-668 Energy Security
Venezuela; (2) refinery inefficiencies resulting from switching crude oil 

types; and (3) a market psychology premium reflecting fears of further 

escalation. 

The EIA analysis did not quantify the impact of an oil embargo on U.S. 

prices of gasoline and other refined petroleum products. However, an 

increase in U.S. crude oil prices by 8 to 11 percent per barrel would raise 

costs of refined petroleum products to the extent that the increase would 

be passed on to the consumer. All else being equal, such an increase would 

add 11 to 15 cents to the price of a gallon of gasoline, assuming the 

conditions in March 2005.14

DOE officials told us that their analysis assumes the $4 to $6 per barrel 

increase would last as long as the disruption. However, adjustments would 

reduce this price impact over time. Refineries, for example, could 

reconfigure some of their processes and make other adjustments over time 

to improve their ability to efficiently handle replacement crude oil types. 

Transportation costs could also adjust over time. For example, Venezuela

likely could switch from the relatively small tankers used for the short 

haul to the United States to very large tankers to move its oil to more 

distant locations, thereby helping offset Venezuela’s increased

transportation costs for shipping the oil longer distances. 

A Venezuelan oil embargo against the United States would also affect the 

Venezuelan economy, but the impact would not be as great as the impact 

of a sudden loss of oil. According to a U.S. company that produces oil in 

Venezuela, such an embargo would reduce PDVSA’s oil revenues from 

between $3–4 billion dollars per year due to the following factors: 

• Refinery operations that Venezuela wholly and partly owns in the United 

States, which take about 70 percent of Venezuela’s oil exports to the 

United States, would be adversely affected by the embargo because they

would have to obtain crude oil from locations farther away than Venezuela 

and the replacement crude oil would likely be of a different quality. 

• Venezuela’s crude oil revenues would be adversely affected by the higher 

cost of transporting oil to locations farther away than the United States 

market. 

 14The impact on the price of gasoline at the pump could be higher or lower depending on 

many factors, such as whether the refiner passed all crude oil cost increase on to the

consumer and whether the gasoline retailer passed all the increases on to the customer. 

Page 26 GAO-06-668 Energy Security
In addition, oil company officials and industry experts told us that few 

countries have significant refining capacity that is designed to efficiently 

process the heavy sour oil from Venezuela. Therefore, it would be difficult

for Venezuela to find markets for all the oil it currently exports to the 

United States. 

If Venezuela shut down its wholly-owned U.S. refineries, the supply of 

gasoline and other refined petroleum products made from crude oil would

decrease and, correspondingly, the prices of these refined petroleum 

products in the United States would increase. Venezuela wholly owns five 

refineries in the United States through its PDVSA subsidiary, CITGO, and 

these account for about 750,000 barrels per day of refining capacity—4 

percent of total U.S. refining capacity. The impacts of shutting down 

CITGO refineries would continue until the closed refineries were reopened 

or new sources of refined petroleum products were brought on line. The 

impacts would be obviously most severe in the United States, although 

increased demand by U.S. oil companies to buy petroleum products from 

other countries could cause prices to rise in those countries as well. 

Venezuela would also lose the profits of these refineries for as long as they 

were shut down, and could face sanctions by the U.S. government—

including freezing Venezuelan assets in the United States—if the closure of 

the refineries were deemed a threat to U.S. security. 

We identified no studies of the impacts of oil refinery shutdowns on the 

prices of refined petroleum products, but a shutdown of several large U.S. 

refineries as a result of hurricanes Katrina and Rita in 2005 clearly 

contributed to sharp increases in U.S. fuel prices. For example, Hurricane 

Katrina caused a shutdown of 879,000 barrels per day, or 5.2 percent of 

U.S. refining capacity. Figure 4 shows that following hurricanes Katrina 

and Rita in late August and late September 2005, gasoline prices increased

by over $1 per gallon on the U.S. Gulf Coast Wholesale Market. While 

these price spikes are indicative of what can happen in the event of 

refinery shutdowns, it must be noted that there were other very important 

disruption factors that affected these prices—such as major pipeline 

shutdowns and damage—which make it difficult to isolate the impact of

the refinery shutdowns. 

Closure of Venezuela’s U.S. 

Refineries would Increase 

U.S. Petroleum Product 

Prices and Reduce 

Venezuelan Revenue 

Page 27 GAO-06-668 Energy Security
Figure 4: Changes in Wholesale Conventional Regular Gasoline Prices in the U.S. Gulf Coast following Hurricanes Katrina 

and Rita

0

50 

100 

150 

200 

250 

300 

350 

11/16/2005

11/2/2005

11/9/2005

10/12/2005

10/19/2005

10/26/2005

9/14/2005

9/21/2005

9/28/2005

10/5/2005

9/7/2005

8/10/2005

8/17/2005

8/24/2005

8/31/2005

8/3/2005

7/13/2005

7/20/2005

7/27/2005

7/6/2005

Hurricane Rita

9/24/2005

Hurricane Katrina

8/29/2005

Cents per gallon 

Date 

Source: Energy Information Administration.

The U.S. government has programs and activities intended, in part, to 

ensure a reliable long-term supply of oil from Venezuela and other oilproducing countries to U.S. and world markets; these programs include 

bilateral technology and information exchange agreements, bilateral 

investment treaties, and multilateral energy initiatives. However, these 

programs and activities have not been pursued with regard to Venezuela in

recent years. The U.S. government has options to mitigate the impacts of 

short-term oil disruptions to global oil supplies, such as the disruption 

caused by the Venezuelan strike. These options include diplomacy to 

persuade oil-producing countries to increase production and using oil in 

the U.S. Strategic Petroleum Reserve, with or without the release of oil 

from other International Energy Agency countries’ strategic reserves. 

However, none of the U.S. government agencies, and few of the U.S. oil 

companies that we contacted, have contingency plans specifically to 

mitigate a Venezuelan oil disruption, although DOE conducts analyses of 

the effects on the market of potential supply disruptions. 

U.S. Government 

Programs and 

Activities to Ensure a 

Reliable Long-Term 

Supply of Crude Oil 

from Venezuela Have 

Been Discontinued, 

but the Government 

Has Options to 

Mitigate Supply 

Disruptions in the 

Short Term 

Page 28 GAO-06-668 Energy Security
The United States has had a bilateral technology and information 

exchange agreement with Venezuela since 1980, and this agreement was 

expanded in 1997 to include policy dialogue on topics such as energy data

exchange, natural gas policy, and energy efficiency. Also, in the 1990s, the 

two countries entered negotiations for a bilateral investment treaty and 

worked together under the multilateral energy initiative to organize 

hemisphere-wide meetings on energy security. By 2004, however, these 

programs and activities had been discontinued as the result of strained 

relations between the two countries and diminished technical capacity in

Venezuela. 

According to DOE, it maintains bilateral technology and information 

exchange agreements with Venezuela and 21 other oil-producing 

countries: Angola, Argentina, Australia, Azerbaijan, Brazil, Canada, China,

Equatorial Guinea, Kazakhstan, India, Italy, Iraq, Mexico, Norway, 

Pakistan, Peru, Russia, Saudi Arabia, the United Kingdom, Ukraine, and 

West Africa/Nigeria. DOE officials told us that bilateral technology and 

information exchange agreements are generally designed to offer avenues 

to leverage publicly funded domestic research, accelerate scientific 

achievement through technical cooperation, and support U.S. economic 

competitiveness by providing U.S. scientists with opportunities to gain 

access to (and build upon) other countries’ research. They also said that 

the agreements with four countries—Venezuela, China, Canada, and 

Mexico—include provisions for cooperation on oil and natural gas 

recovery technology that DOE requires be based on joint research of 

mutual benefit. In the case of Venezuela, the specific purpose of the 

bilateral technology exchange agreement was to cooperate on oil and gas 

technology and, after 1997, incorporate policy dialogue on such issues as 

the exchange of information regarding the design and implementation of 

energy regulatory systems, the development and evaluation of energy 

resources and production, and the application of alternative energy 

sources. DOE headquarters and field staff told us that the technical 

exchanges between the United States and Venezuela under the agreement 

were robust. For example, meetings were held about twice annually where 

technical staff from both countries exchanged information. 

U.S. Programs and 

Activities to Ensure a 

Long-Term Supply of 

Venezuelan Crude Oil for 

the United States Were 

Discontinued 

Oil Production Technology and 

Information Exchanges 

between the United States and 

Venezuela Occurred until 2003 

Since November 21, 2003, however, no formal meetings of the countries’ 

technical staff have occurred. DOE headquarters and field officials told us 

they were directed in 2003 by DOE headquarters to stop activities under 

the agreement to accommodate diplomatic decisions. In addition, DOE 

officials also told us that the last few technical meetings involved very 

little exchange of technology information. Specifically, they said that after 

the Venezuelan government fired a significant number of technical 

Page 29 GAO-06-668 Energy Security
employees following the Venezuelan strike, DOE technical staff had 

difficulty identifying technical counterparts in Venezuela to maintain 

activities under the agreement. 

Venezuelan officials told us that attempts to encourage DOE to continue 

activities under the technology exchange agreement were unsuccessful. 

For example, Venezuela sent two letters to DOE in 2005 to arrange 

meetings between Venezuela’s Minister of Energy and Petroleum and the 

Secretary of DOE, but DOE’s response to one letter stated that the 

Secretary of DOE was unable to meet, and, according to the Venezuelan 

spokesperson, DOE did not respond to the other letter. Also, the 

Venezuelan spokesperson told us that in November 2003, Venezuela 

presented DOE with a plan to reactivate projects under the agreement but 

DOE demonstrated no interest. The spokesperson also said that in March

2006, DOE officials told PDVSA’s vice president of production that DOE 

would not resume activities under the agreement until the political 

relationship between Venezuela and the United States improved. DOE 

officials confirmed this, but said DOE also told PDVSA’s vice president of 

production that part of the reason activities could not be resumed was 

because DOE research on technology to extract extra-heavy oil and gas 

was not a high priority, as it had been at one time, because high energy 

prices removed the need to subsidize such research. 

According to Department of State and the Office of the U.S. Trade 

Representative officials, informal bilateral investment treaty discussions 

with Venezuela began in 1992 and formal negotiations began in October 

1997. The United States has bilateral investment treaties in force with 39 

countries, including many oil- and gas-producing countries such as Bolivia, 

Kazakhstan, Trinidad and Tobago, and the Ukraine. These treaties provide 

rules on investment protection, binding international arbitration of 

investment disputes, and repatriation of profits, and assist U.S. companies 

doing business in foreign countries. In our 1991 report on Venezuelan 

production and conditions affecting potential future U.S. investment there, 

we observed that most of the 22 oil companies with whom we spoke 

during that effort told us that a bilateral investment treaty would help 

increase their investment protection. In that report, we also noted that an

official in the Office of the U.S. Trade Representative said that, in order for 

negotiations to be successful, Venezuela would have to meet standards set 

forth in the model U.S. treaty—including provisions prohibiting 

nationalization of property, providing for repatriation of profits, and 

providing for international arbitration to resolve disputes. 

Negotiations for a Bilateral 

Investment Treaty Ceased in 

1999 

Page 30 GAO-06-668 Energy Security
U.S. and Venezuelan government officials said that bilateral investment 

treaty negotiations broke down in 1999 because of significant policy 

differences between the two countries. A Venezuelan spokesperson and 

U.S. officials identified three major differences, including the model treaty

provisions relating to performance requirements, such as rules stipulating 

minimum content requirements and obligations to compensate investors 

for damage done by internal strife. 

In May 2001, the U.S. National Energy Policy Development Group 

recommended that the United States conclude bilateral investment treaty 

negotiations with Venezuela. Department of State officials told us that 

later in 2001, when they revisited the issue in response to this

recommendation, they made an effort to reengage Venezuela, but the

effort proved unsuccessful because of continued major differences 

between the two countries. Department of State officials said they decided 

that the probability of negotiating a treaty that contained the high 

standards the United States expects was very unlikely, and they pursued 

the treaty no further. Department of State officials told us that in bilateral 

investment treaty negotiations generally, it is overall policy to insist on the 

high standards contained in the U.S. model treaty to avoid a dilution of 

standards across agreements. 

Many oil company officials and experts said that a bilateral investment 

treaty could have helped protect oil companies’ investments in Venezuela 

when the Venezuelan government unilaterally required them to change

their existing operating service agreements to comply with the new 

hydrocarbon law. For example, officials from one U.S. oil company said 

new agreements that companies were required to sign did not contain 

provisions allowing international arbitration to settle disputes. The 

officials said their company was concerned about the fairness of having 

Venezuelan arbitrators settle disputes between U.S. companies and PDVSA 

or the Venezuelan government. International arbitration was required 

under the company’s old agreements, and the current U.S. model bilateral

investment treaty provides for it. Some U.S. oil company officials also told

us that some companies are considering incorporation in other countries 

that have bilateral investment treaties with Venezuela, such as the United 

Kingdom and the Netherlands, because the treaties would help protect 

their investments. Similarly, some oil experts also told us companies from 

countries with bilateral investment treaties have assurances that they can

repatriate profits if Venezuela seizes control of their operations. 

Page 31 GAO-06-668 Energy Security
In 1994, DOE and the Venezuelan Ministry of Energy and Petroleum 

became the principal coordinators of what was known as the Hemispheric

Energy Initiative. The goal of this activity was to stimulate dialogue and 

cooperation on energy issues among countries in the Western Hemisphere 

and identify and promote actions to foster regional interconnections 

through the development of energy sector projects in the hemisphere. As 

the coordinators, DOE and Venezuela’s Ministry of Energy and Petroleum 

organized a series of hemispheric-wide summit meetings to discuss energy 

cooperation beginning in 1995. For example, at the third hemispheric 

meeting in Caracas, Venezuela, in January 1998, officials from the 26 

countries in attendance agreed to promote policies that facilitated trade in

the energy sector and facilitate the development of the energy 

infrastructure, develop regulatory frameworks that are transparent and 

predictable, and promote foreign private investment in the sector 

throughout the hemisphere. DOE officials told us that this initiative ended 

with the meeting in Mexico in 2002, but that, in 2004, Trinidad offered to 

host a meeting of hemispheric energy ministers in a less formal setting to 

discuss energy security. The meeting, which was held in Trinidad and 

Tobago in April 2004, was organized by DOE and Trinidad, without 

Venezuela playing a significant role organizationally. The meeting focused

on hemispheric energy security and included high-ranking energy officials 

from 35 countries, including the United States, Canada, Mexico, and 

Venezuela, as well as other key energy-producing countries from Central 

and South America. DOE officials told us that, during the meeting, 

Venezuela’s Minister of Energy and Petroleum met with DOE’s Secretary 

and agreed that it was very important not to politicize the oil trade 

between the United States and Venezuela and that both countries 

recognized the importance of that trade. According to DOE officials, no 

action has taken place since the meeting in Trinidad and Tobago. 

The United States and 

Venezuela Participated in the 

Multilateral Hemispheric 

Energy Initiative until 2004 

According to Department of State and other U.S. government officials, the 

United States has had historically strong ties to Venezuela with respect to 

oil issues, and the dialogue between the two countries in the past was 

robust. But the relationship between the two countries with respect to 

energy issues has changed in recent years—some energy related activities 

previously used to foster energy security have been discontinued. For 

example, DOE officials told us that 3 years have elapsed since the last 

formal discussion between DOE and the Venezuelan Ministry of Energy 

and Petroleum regarding energy security. Also, officials in the Commerce 

Department and in the Office of the U.S. Trade Representative reported 

there is no current engagement between them and their counterparts in 

Venezuela regarding energy security. Officials in Department of State 

headquarters said that they have worked hard for years to build a 

Relations between the United 

States and Venezuela Have 

Become Strained 

Page 32 GAO-06-668 Energy Security
productive energy relationship with Venezuela by participating in frequent 

consultations with Venezuelan energy officials, meeting most recently in

March 2006. DOE officials also said they have maintained open dialogue

with Venezuelan energy officials. 

Most U.S. oil companies have not relied on assistance from the U.S. 

government to help with issues in Venezuela in recent years although, 

according to DOE officials, DOE stays in contact with companies 

regarding the situation in Venezuela, and senior DOE officials frequently 

report on the status of U.S. energy investment and overall energy 

production in Venezuela at senior-level meetings of the U.S. government. 

The U.S. Ambassador to Venezuela told us he does not have good access 

to Venezuelan government officials and, correspondingly, it is difficult to 

help U.S. companies doing business in Venezuela obtain access to 

Venezuelan officials. Officials in the Departments of Commerce and State, 

and in the Office of the U.S. Trade Representative, told us companies that 

might otherwise seek their assistance in negotiating with foreign 

governments do not do so in Venezuela because the companies do not 

believe that federal agency intervention would be helpful. For example, an

official from the Department of Commerce said that U.S. government 

involvement would be extremely harmful to the relationship between U.S.

companies and their business interests in Venezuela. Officials in several 

U.S. oil companies told us that the poor bilateral relationship between the 

United States and Venezuela makes it difficult for them to operate and 

compete for new investment contracts in Venezuela. 

The U.S. Government Has 

Options to Mitigate the 

Impacts of Short-Term 

Venezuelan Oil Supply 

Disruptions 

Key activities and programs that the U.S. government has used to mitigate 

the impacts of short-term oil supply disruptions include diplomacy, 

whereby U.S. government officials negotiate with senior officials in oilproducing countries to increase their supply of crude oil in case of a 

disruption; using oil in the U.S. Strategic Petroleum Reserve; and 

coordinating with the International Energy Agency, whose members hold 

stocks equal to 90 days or more of its net imports to address supply 

disruptions.15 Officials in the Department of State and DOE, as the lead

agencies in crafting U.S. energy security policy, consult with each other, 

with other U.S. government agencies (as appropriate), and with U.S. 

 15DOE officials also told us that they encourage energy efficiency and conservation during

oil disruptions.

Page 33 GAO-06-668 Energy Security
companies doing business in foreign countries to identify potential oil 

disruptions and craft responses to the disruptions, if necessary. 

U.S. government agencies used diplomacy to mitigate the impact of the oil 

disruption resulting from the Venezuelan strike. Anticipating a potential oil 

supply problem in Venezuela, representatives from key DOE offices began 

coordinating with the Department of State months before the strike to 

produce a plan to bring together data and information about possible 

supply problems and to produce an appropriate response to the potential

disruption. The overall effort was headed by the National Security Council 

and top U.S. government administration officials, with Department of State 

and DOE officials acting as subject experts. After the strike began, the 

Department of State and DOE used diplomacy to encourage increases in 

OPEC member and other countries’ crude oil production by 1.3 million 

barrels per day. Also, according to DOE officials, DOE officials 

responsible for coordinating oil supply disruptions responses with the 

International Energy Agency upgraded their day-to-day contact with 

emergency response officials at the agency, focusing on the strike’s 

potential impacts and assessing possible mitigation measures. According 

to an EIA study, most of the replacement oil came from Mexico and the 

Middle East, especially Iraq. 

Not withstanding this success, most oil industry officials and experts, as 

well as U.S. government officials, said that using diplomacy to obtain 

additional oil likely would be less effective today because there is less 

surplus oil production capacity now than there was during the Venezuelan 

strike. During the Venezuelan strike, as much as 5.6 million barrels per day 

of spare oil production capacity was available from several regions, 

including Mexico, West Africa, and the Middle East. Now, experts say that 

the total world spare production capacity is only about 1 million barrels 

per day, and most of it is in Saudi Arabia. If the oil balance continues to 

tighten and surplus production capacity shrinks, increasing production in

response to disruptions will be more difficult, if not impossible. 

Aside from using diplomacy, another tool for mitigating supply disruptions 

is the use of oil reserves. The U.S. government can use the U.S. Strategic 

Petroleum Reserve to increase the supply of crude oil available to U.S. 

refineries in three ways: selling oil from the reserve, exchanging oil from 

the reserve whereby Reserve oil is replaced at a specified date in the 

future, and allowing oil companies to delay delivering oil to the reserve. 

Federal law requires that the drawdown and sale of oil from the Strategic 

Petroleum Reserve be authorized by the President. However, DOE can 

authorize an exchange of oil from or a delay in delivery of oil to the 

Page 34 GAO-06-668 Energy Security
Reserve. 16 While no set criteria exist for triggering the release of oil from 

the reserve in the case of a supply disruption, U.S. agency officials told us 

that, during any disruption, the Department of State and DOE provide 

analytical and technical advice through the National Security Council to 

help the President evaluate his options. U.S. policy makers believe that 

providing oil during a supply disruption is the most efficient mechanism to 

counteract the impacts of the disruption. 

The United States currently maintains about 700 million barrels of crude 

oil in the U.S. Strategic Petroleum Reserve. If 1.5 million barrels a day 

were released—the amount of crude oil exported by Venezuela to the 

United States—the reserve is enough to replace over 450 days of lost 

Venezuelan oil. During the Venezuelan oil strike, oil was not withdrawn 

from the U.S. Strategic Petroleum Reserve, mostly because other oilproducing countries increased production by 1.3 million barrels a day. 

However, the U.S. government allowed U.S. oil companies to delay 

delivering oil that they were committed to deliver to the U.S. Strategic 

Petroleum Reserve, which added about 18 million barrels to the U.S. oil 

supply available to refineries—an amount equivalent to almost 1 day of 

U.S. oil consumption, or almost 2 weeks of Venezuelan oil exports to the 

United States. 

In addition to using the U.S. Strategic Petroleum Reserve to mitigate the 

impact of a supply disruption, the United States could also benefit if the 

strategic reserves of International Energy Agency member countries were 

released. Each International Energy Agency member country is required to 

hold stocks equal to 90 days or more of its net imports. Presently, 

International Energy Agency countries hold about 4.1 billion barrels of oil 

stocks. According to a DOE official, the three countries with the largest 

government controlled reserves—the United States, Germany, and 

Japan—are able to release about 8 million barrels a day at the onset of a 

disruption. This quantity is equal to about 10 percent of total world oil 

demand. The International Energy Agency also requires member countries 

to release stocks, restrain demand, and share available oil, if necessary, in

the event of a major oil supply disruption. While there are no criteria for 

triggering the release of oil from the member countries’ reserves, the 

International Energy Agency has specified arrangements for the 

coordinated use of a drawdown, the restraint of demand, and other 

 16Energy Policy and Conservation Act § 161(d) as amended, 42 U.S.C. § 1641(d) et seq. The

Secretary is also authorized to carry out test drawdowns and sales not to exceed 5,000,000 

barrels of petroleum products. 42 U.S.C. § 6241(g).

Page 35 GAO-06-668 Energy Security
measures that member countries could implement in case of a disruption. 

Also, International Energy Agency officials say that a disruption of 7 

percent or more of world supply is a de facto trigger. 

During the Venezuelan strike, the Department of State and DOE 

maintained steady diplomatic contact with members of the International

Energy Agency to discuss the evolving situation and to share concerns in

case a drawdown of member reserves was deemed necessary. A later 

International Energy Agency analysis of the Venezuelan disruption 

concluded that, although International Energy Agency member-country 

stocks were not used during the Venezuelan disruption, the presence of 

the International Energy Agency stocks played an important role in 

reassuring the market. Furthermore, the availability of government stocks 

muted speculation on the markets, according to an International Energy 

Agency analysis of the disruption. 

Although the U.S. government has options to mitigate impacts of shortterm oil disruptions on crude oil and petroleum products prices, these 

mitigating actions are not designed to address a long-term loss of 

Venezuelan oil from the world market. If Venezuela fails to maintain or 

expand its current level of production, the world oil market may become 

even tighter than it is now, putting further pressure on both the level and 

volatility of energy prices. In this context, the United States faces 

challenges in the coming years that may require hard choices regarding 

energy sources, foreign relations and energy-related diplomacy, and the

amount of energy Americans use. 

Officials in the four U.S. government agencies we contacted said they do 

not have contingency plans to deal with oil losses specifically from 

Venezuela or any other single country. Officials at the lead agencies for 

energy security, the Department of State and DOE, said they do not have

specific plans because the available mechanisms to mitigate the impacts of 

an oil disruption—diplomacy to persuade oil-producing countries to 

increase production and using oil from the U.S. Strategic Petroleum 

Reserve—are adequate to deal with disruptions from any source. 

According to DOE officials, it conducts scenario analyses of the 

vulnerabilities of disruptions from certain countries and relies on these 

options to deal with disruptions. They said that these options have been 

proven to be adequate. 

Officials in most oil companies we contacted also said they do not have

plans to deal specifically with a disruption of Venezuelan oil because, as 

with any oil disruption, if a Venezuelan oil disruption were to occur they 

Page 36 GAO-06-668 Energy Security
would replace the lost oil with oil from other sources. The officials said 

that oil is a fungible commodity and typically available on the spot market. 

During the Venezuelan strike, for example, U.S. refiners replaced 

Venezuelan crude oil with crude oil from other sources, including Mexico, 

Brazil, Russia, Ecuador, and the Middle East. 

We provided the Departments of State and Commerce, DOE, and the 

Office of the U.S. Trade Representative with a draft of this report for their 

review and comment. The Department of State and the Office of the U.S. 

Trade Representative told us that they generally agreed with the findings 

of the report but did not provide written comments. DOE and the 

Department of Commerce provided written comments. The Department 

of Commerce agreed with the report’s overall findings; Commerce’s letter 

is reproduced in appendix II. DOE neither agreed nor disagreed with the 

report’s overall findings, noting that the United States has had a long and 

mutually beneficial relationship with Venezuela and that our report makes 

valuable points regarding the challenges facing Venezuelan crude oil 

production. However, DOE raised two issues that it contends provide an

“alarmist view” of U.S. energy security. DOE’s concerns and our response 

to them are summarized below; DOE’s letter is reproduced in appendix III. 

All four agencies also provided technical comments, which we 

incorporated as appropriate.

Agency Comments 

and Our Evaluation 

DOE’s first concern is that a $23 billion loss to U.S. GDP, which we 

reported and attributed to a model developed for DOE by a contractor, is 

misleading and will be taken out of context because the prediction does 

not take into account mitigating factors that could influence the impact of 

an oil disruption on U.S. GDP. Specifically, DOE said that the prediction 

does not take into account worldwide response to an oil supply disruption, 

the availability of Arab Heavy oil to replace lost Venezuelan heavy oil, and 

the ability to use the U.S. Strategic Petroleum Reserve and worldwide 

stocks to mitigate the impact of a disruption. We disagree that our 

reporting of the model results is misleading or out of context and believe 

all the mitigating factors raised by DOE have been addressed in our report. 

Contrary to DOE’s assertion, the model that predicted the $23 billion loss 

incorporates the worldwide response and availability of replacement oil 

from surplus production capacity, such as Arab Heavy oil. However, as 

our report notes, because there is much less surplus capacity available

today than there was in winter 2002-2003 when a similar disruption 

occurred as a result of the Venezuelan strike, relying on surplus capacity

would not be as effective as it was at that time. Also, our report discusses 

in detail the options the U.S. government has to mitigate the impacts of an 

Page 37 GAO-06-668 Energy Security
oil disruption, including using strategic petroleum reserves, either 

unilaterally or in concert with other countries. DOE also states that the 

report does not contain an analysis of the impact of a Venezuelan oil 

supply disruption on that country’s economy. We disagree with this 

assertion. Our report discusses the severe impact a Venezuelan oil 

disruption would have on that country’s economy—the Venezuelan 

national oil company is the country’s largest employer, and accounts for a 

third of Venezuela’s GDP, four fifths of its export revenue, and half of 

government revenue—and notes that Venezuela would likely take steps to 

correct any such disruption as soon a possible to avoid that impact. 

DOE’s second concern is that by focusing on the discontinuation of 

bilateral programs with Venezuela our report leads the reader to believe 

that such programs could guarantee U.S. energy security. We disagree;

nowhere in the report do we imply that such programs with Venezuela 

could guarantee the United States’ energy security. On the contrary, we 

point out that instability in Venezuela’s oil sector exists in a broader 

context of tightening global oil supply and demand balance and that 

instability of any significant individual oil-producing country can have a 

significant impact on U.S. and world energy security. Further we report 

that a number of factors create energy security concerns, including a 

reduction in global surplus oil production capacity in recent years, the fact 

that much of the world’s supply of oil is in relatively unstable regions, and

rapid growth in world oil demand that has led to a tight balance between 

demand and supply. DOE also states that our report does not address the 

comprehensive actions the U.S. is taking domestically and internationally 

to ensure energy security. While a comprehensive assessment of U.S. 

energy security was beyond the scope of this report, our report 

nonetheless notes that the United States has long had a number of 

programs and activities designed to ensure energy security. For example, 

for those initiatives identified as within the scope of our report, we listed 

the 21 other countries with which the U.S. government has negotiated 

bilateral technology and information exchange agreements. 

Overall, we disagree that our report, as written, presents an “alarmist 

view” of U.S. energy security. We point out that oil supply disruptions can 

have adverse economic impacts but that the U.S. government has options 

to mitigate such impacts. However, we also point out that these mitigating 

options are only designed for short-term disruptions and there remain 

potential long-term concerns with regard to Venezuelan oil supply in the 

event that Venezuelan oil production continues to fall. 

 

Page 38 GAO-06-668 Energy Security
We are sending copies of this report to interested congressional 

committees, the Secretary of Energy, the Secretary of State, the United 

States Trade Representative, and the Secretary of Commerce. In addition, 

the report will be available at no charge on the GAO Web site at 

http://www.gao.gov. 

If you or your staff have any questions, please contact me at (202) 512-3841

or at wellsj@gao.gov. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this report. 

GAO staff who made major contributions to this report are listed in 

appendix IV.

Sincerely yours, 

Jim Wells 

Director, Natural Resources 

 and Environment 

Page 39 GAO-06-668 Energy Security
Appendix I: Objectives, Scope, and Appendix I: Objectives, Scope, and Methodology 

Methodology 

The Chairman of the Senate Committee on Foreign Relations asked us to 

answer the following questions: (1) How have Venezuela’s production of

crude oil and exports of crude oil and refined petroleum products to the 

United States changed in recent years, and what are the future prospects? 

(2) What are the potential impacts of a reduction in Venezuelan oil 

exports, a Venezuelan embargo on oil exports to the United States, or 

sudden closure of Venezuela’s refineries in the United States? (3) What is 

the status of U.S. government programs and activities to ensure a reliable 

supply of oil from Venezuela and to mitigate the impacts of a supply 

disruption? We used a number of methodological techniques to address 

these issues. 

To address the first objective, we reviewed studies and analyses of the 

Venezuelan oil sector and its history. We met with officials from 10 U.S. 

and multinational oil companies, eight refiners, and two service 

companies; industry experts from the International Energy Agency, the 

Center for Strategic and International Studies, the National Petrochemical 

and Refiners Association, an international energy consulting firm, and 

other institutions; and officials from the Department of Energy (DOE), 

Department of State, Department of Commerce, the Office of the United 

States Trade Representative, the U.S. Geological Survey, and various other 

U.S. government agencies. In addition, we visited Caracas, Venezuela, and 

met with the U.S. Ambassador and embassy staff; Venezuela’s Minister of

Energy and Petroleum; Petroleos de Venezuela S.A. (PDVSA) officials, 

including the president, the vice president of production, and a number of 

PDVSA board members and senior managers; the Venezuelan Auditor 

General; members of the financial community; and other individuals with 

expertise in the oil sector of Venezuela. We met with operations officials at 

various oil exploration, production, and refining centers in the Maracaibo

and Faja regions of Venezuela. Both in the United States and in Venezuela,

we spoke with numerous former PDVSA employees, executives, and 

directors, and oil company officials. We also collected, evaluated the 

reliability of, and analyzed data on Venezuelan production, consumption, 

and exports of oil and petroleum products. The sources of our data 

include U.S. government agencies, especially the Energy Information 

Administration (EIA); the International Energy Agency; the Venezuelan 

government and PDVSA; and other governmental and private sources. We 

deemed these data to be reliable for the purposes of addressing our 

objectives. Regarding Venezuela’s plans for future production, we 

analyzed plans and data provided by the Ministry of Energy and Petroleum 

and PDVSA officials. We also discussed the feasibility of Venezuela 

implementing its plans with Department of State and DOE officials, as well

as with numerous oil company officials and industry experts. 

Page 40 GAO-06-668 Energy Security
Appendix I: Objectives, Scope, and 

Methodology 

To address the second objective, we reviewed several studies of the 

impacts of oil disruptions, including the impact of the Venezuelan strike in

the winter of 2002–2003. We also analyzed current conditions in the world 

oil market to evaluate what might occur if a similar disruption occurred 

today. We also evaluated the potential impacts of—(1) a sudden and 

severe drop in Venezuelan oil exports from the world market, (2) a sudden 

diversion of oil from the United States to other markets through an 

embargo, and (3) the closure by Venezuela of its wholly-owned U.S.-based

refineries. Specifically, we asked a DOE contractor at the Oak Ridge 

National Laboratory to use an economic oil-disruption model to analyze 

the impacts of a hypothetical Venezuelan oil disruption on world oil prices 

and on the U.S. gross domestic product (GDP). For this analysis we 

constructed a hypothetical disruption scenario similar to the one that 

actually occurred during the Venezuelan oil strike in the winter of 2002–

2003, but using assumptions regarding market and economic conditions 

closer to those that prevailed at the time of the analysis (late 2005). We

also conducted our own analysis of the same scenario using EIA’s oil 

disruption rules of thumb that predict how oil prices and the U.S. GDP 

respond to disruptions in world oil supplies. For the analyses of the 

potential impacts of a Venezuelan embargo against the United States, we 

relied largely on EIA analyses. For the impacts of Venezuela’s sale or 

closure of its CITGO refineries in the United States, we analyzed the 

response of gasoline prices to the major loss of refinery capacity that 

accompanied hurricanes Katrina and Rita in 2005. In addition, we 

discussed the impact of potential Venezuelan oil disruptions with 

numerous industry experts in Venezuela and in the United States; officials 

in the Departments of State and Commerce, and DOE; and International 

Energy Agency officials. 

To address the third objective, we met with officials at various U.S. 

government agencies, including the Departments of State and Commerce, 

DOE, and the Office of the U.S. Trade Representative, to identify the status 

of programs and activities to ensure a continued supply of oil and to 

mitigate a disruption of imports of crude oil and refined petroleum 

products from Venezuela, as well as to determine whether the agencies 

have Venezuelan-specific contingency plans. We also met with officials of

10 U.S. and multinational oil companies, eight refiners, and two service 

companies; industry experts from the International Energy Agency, the 

Center for Strategic and International Studies, the National Petrochemical 

and Refiners Association; Purvin and Gertz; and other institutions. In 

addition, we obtained information on Venezuelan decrees and legislation 

governing foreign investment in the petroleum industry. We reviewed our 

previous work on U.S. energy security, especially our 1991 study, 

Page 41 GAO-06-668 Energy Security
Appendix I: Objectives, Scope, and 

Methodology 

“Venezuelan Energy: Oil Production and Conditions Affecting Potential 

Future U.S. Investment.” 

Because the Department of State advised us that visiting port facilities 

may be considered too sensitive to the Venezuelan government given that 

government’s apprehension about the U.S. government, we did not assess 

port or other facilities for vulnerability to sabotage or attack. However, the 

Coast Guard, as part of its port security responsibilities, identifies 

countries that are not maintaining effective antiterrorism measures. 

According to Coast Guard officials, Venezuela has not been identified as 

such a country. 

This report focuses on federal programs and activities related to U.S. 

energy security. Diplomatic and political actions that may impact U.S. 

energy security may be undertaken for a multitude of foreign policy goals

that are beyond the scope of this report. Therefore, our evaluation of 

programs and activities related to energy security is in no way intended to

evaluate the U.S. government’s approach to these broader goals. 

Department of State officials reviewed a draft of our report to ensure we 

did not include information in our report that could influence diplomatic 

relations. 

To obtain the official Venezuelan government position on questions 

relating to all three objectives, we made arrangements with the 

Venezuelan Embassy in Washington, D.C., for an official spokesperson. 

Generally, we submitted questions to the spokesperson who then asked 

for answers and explanations from the appropriate officials in Venezuela 

and provided the answers to us, usually in writing. In addition, the 

spokesperson made several presentations to provide information on 

Venezuela’s oil sector. We did not verify the information provided by the 

spokesperson. In addition, we did not independently review Venezuelan 

laws and decrees, and relied on secondary sources such as interviews. 

We performed our work from March 2005 through May 2006 in accordance

with generally accepted government auditing standards. 

Page 42 GAO-06-668 Energy Security
Appendix II: Comments from the Department Appendix II: Comments from the Department of Commerce 

of Commerce 

Page 43 GAO-06-668 Energy Security
Appendix III: Comments from the Department Appendix III: Comments from the of Energy 

Department of Energy 

Page 44 GAO-06-668 Energy Security
Appendix III: Comments from the Department 

of Energy 

Page 45 GAO-06-668 Energy Security
Appendix IV: 

A

GAO Contact and Staff 

cknowledgments 

Page 46 GAO-06-668

Appendix IV: GAO Contact and Staff 

Acknowledgments 

GAO Contact Jim Wells (202) 512-3841

In addition to the individual named above, Philip Farah, Byron S. 

Galloway, Carol Kolarik, Michelle Munn, Cynthia Norris, Melissa Arzaga 

Roye, Frank Rusco, and Barbara Timmerman made key contributions to 

this report. 

Energy Security

Staff 

Acknowledgments 

(360592) 
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