With vast petroleum deposits, extensive waterways, and an abundance of natural gas, Venezuela possesses great electric power potential. As of 2002 the country was more than 90% electrified and had the highest per capita rate of electricity use in Latin America. In 2001, total installed capacity was 21,233 MW. Total electrical output in 2000 was an estimated 83.2 billion kWh, of which 22.9% was from fossil fuels and 77.1% from hydropower. Consumption of electricity in 2000 was 75.1 billion kWh. Until 1975, the electric power companies were privately owned, with the exception of the government-run Maracay Electric. In March 1975, President Marcos Pérez announced that all electrical generating companies would be taken over by the state by the end of the year and merged into a single enterprise. Privatization of many government-owned enterprises began in 1991. The electricity sector in 2002 was a hybrid of state-owned and private companies using a fully integrated system of transmission lines. The largest utility, Electrificación de Caroni, generated more than 70% of the country's power.
In 1964, a regional development agency, the Corporación Venezolana de Guayana, began construction of one of the world's largest hydroelectric power plants. Constructed across the Caronií River, which flows out of the Guiana Highlands, the Guri Dam began operations in November 1968, generating 525,000 kW of power. As of 2002 the Guri station was the second-largest operational hydroelectric plant in the world, with installed capacity of 10,000 MW. About 75% of total electric generating capacity is hydropower. Hydropower generation is expected to grow as Venezuela adds 8,000 MW during 1996–2006. Hydroelectric potential is estimated at 70,000–80,000 MW or more.
Venezuela is among the world's 10 leading oil producers. Together with Mexico and the North Sea area, Venezuela is among the most important producers of oil for the Western world outside of the Middle East, with a net exportable capacity of about two million barrels of oil per day as of 2002. Venezuela's proven oil reserves are the largest outside the Middle East. In early 2002, proven oil reserves were estimated at 77.7 billion barrels. The Orinoco tar belt has potential in-place reserves of 1.2 trillion barrels inside a region about 434 km (270 mi) by 64 km (40 mi) in eastern Venezuela. More than half of Venezuela's reserves are heavy or extra-heavy oil. As of 2002 four congressionally approved joint ventures with foreign partners operated advanced refineries to process heavy crude into more marketable products.
Petroleum production in Venezuela began in 1917, when 120,000 barrels were produced. Until the early 1960s, Venezuela was the world's third-largest producer of oil after the United States and the USSR. Output rose to a peak daily volume of 3,700,000 barrels a day in 1970, but in 1974, President Pérez began a conservation program, resulting in cutbacks to 2,400,000 barrels a day by mid-1975. The 1986 collapse of oil prices eventually forced the Organization of the Petroleum Exporting Countries (OPEC) producers to set production quotas, which cut Venezuela's output to 1.5 million barrels per day for the first half of 1987. At the beginning of 2003, OPEC's crude oil production quota for Venezuela was about 2.5 million barrels per day, but production in the first nine months of 2002 was 2.9 million barrels per day.
The output of natural gas was an estimated 28.3 billion cu m (999 billion cu ft) in 2000. Proven reserves totaled 4.2 trillion cu m (148 trillion cu ft) in early 2002. The long-awaited Cristóbal Colon liquefied natural gas (LNG) export project received congressional approval in August 1993. The $4.9-billion multinational project plans to eventually export up to six million tons of LNG annually, supplied by four offshore Caribbean fields utilizing 77 km (48 mi) of pipelines. As of 1996, the project was being delayed due to the forecasted low prices for natural gas. The Deltana Platform, a project to exploit natural gas unassociated with crude oil, was launched in early 2002.
On 29 August 1975, President Pérez signed into law the Oil Industry Nationalization Act, under which all concessions to private oil companies were rescinded as of 31 December 1975. A state holding company, Petroleum of Venezuela (Petróleos de Venezuela—Petrovén), was established in September 1975 with an initial capitalization of $465 million. Petrovén obtained a 50-year renewable monopoly over Venezuelan petroleum production, beginning 1 January 1976. Within a few years, Petrovén's 16 original operating companies were combined into four. In 1986, the state holding company (now referred to as Petróleos de Venezuela, S. A.—PdVSA) was reorganized. PdVSA has developed a reputation as the best-managed state oil company in the world; the company has major refinery, pipeline, and service station networks in Europe, the United States, and elsewhere in the Caribbean.
Two decades after nationalizing its oil industry, Venezuela started trying to establish strategic alliances with foreign oil companies. In July 1995, Venezuela's oil sector was opened to limited foreign participation in exploration and production. Legislation passed in 2001 mandated that PdVSA hold a 51% stake in all joint ventures with foreign companies. As of 2002, PdVSA accounted for about one-third of Venezuela's gross domestic product (GDP) and was the country's single largest employer. Privatization of the company is forbidden under Venezuela's 1999 constitution.