Bass Energy & Exploration is independently owned and operated by the Bass family.
Bass Energy & Exploration
7 NE 6th Street
Oklahoma City, OK 73104
As global energy markets enter 2026, a sharp split is emerging: physical supply destruction in the Western Hemisphere vs. strategic demand consolidation in the East. The contrasting trajectories of Venezuela and India illustrate a new era where geopolitical hard power and long-term investments are redefining market structure. Three key developments highlight this shift:
Venezuela’s Upstream Collapse: In South America, a U.S. naval blockade of Venezuela has precipitated a logistical crisis. With export routes choked off, Venezuela’s storage has hit capacity, forcing its state oil company (PDVSA) to shut in wells in the Orinoco Belt. This move – a last resort due to the high costs and technical challenges of restarting heavy oil wells – risks permanently damaging reservoir capacity and removing hundreds of thousands of barrels of heavy crude from the global supply.
Saudi Aramco’s Asia Pivot: In Asia, the center of oil demand growth has decisively shifted to India. Saudi Aramco is finalizing a strategic entry into India’s refining sector by taking a 20% stake in a new $11 billion refinery project with Bharat Petroleum (BPCL). This acknowledges a fundamental reality: India has overtaken China as the primary driver of incremental oil demand. By securing downstream equity in a 240,000 bpd coastal refinery slated for 2029 startup, Aramco is effectively creating a “forever home” for its crude in the world’s fastest-growing energy market.
California’s Oil Thaw: In North America, a significant legal reversal has unfolded in California. A federal appeals court has cleared Sable Offshore Corp. to restart the long-idled Las Flores Pipeline, reconnecting three offshore platforms to onshore facilities. This legal victory – won despite vigorous environmental opposition – underscores the tension between ambitious decarbonization policies and the pragmatic need for energy security. With in-state production plummeting and over 70% of California’s crude now imported, even a modest restoration of local output tests the balance between climate ideals and fuel supply realities.
These developments suggest that while the West grapples with “above-ground” risks (regulatory hurdles, sanctions, blockades), the East is rapidly building the physical infrastructure to dominate the next half-century of hydrocarbon consumption. The convergence of these narratives signals a new phase in global energy geopolitics – one defined by scarcity of certain crude grades and the enduring strategic value of oil assets in a transitioning world.
Venezuela’s oil sector has entered a collapse phase as U.S. sanctions and enforcement turn from financial pressure to physical chokehold. Reports confirm that Petróleos de Venezuela S.A. (PDVSA) has begun shutting in wells in the Orinoco Belt, home to the world’s largest oil reserves, because it has literally run out of storage. With export routes to Asia strangled by a naval blockade, crude inventories have hit “tank tops,” leaving the oil nowhere to go. As a result, PDVSA approved a drastic production cut effective December 28, slashing Orinoco output by 25% (down to about 500,000 barrels per day) – roughly a 15% cut of Venezuela’s total 1.1 million bpd output. China, Venezuela’s main customer via sanctioned vessels, can no longer receive the flow, and the blockade has effectively executed an upstream shut-in of the nation’s lifeblood.
The decision marks a grim milestone for President Nicolás Maduro’s regime. Throughout years of sanctions, Caracas tried to maintain oil exports at any cost due to their centrality to the economy. Now, the forced shut-ins signal that logistical constraints have overpowered production ambitions. Crucially, disabling wells is seen as a measure of last resort – one with potentially irreversible consequences – because of the operational challenges and high costs to restart these wells. Unlike shutting a valve on a pipeline, once a heavy oil well is turned off, physics and geology start to work against a restart.
The move to halt production in the Orinoco Belt carries extreme technical risks that financial markets may be underestimating. Venezuela’s extra-heavy crude is viscous and tar-like; once production stops, the oil left in wells and flowlines can cool and harden.
In sum, the Venezuelan scenario has escalated from an export blockade to an outright physical disruption of supply. A geopolitical strategy (sanctions and blockades) is causing geological consequences. Investors should monitor whether these shut-ins become permanent, as it would remove a significant volume of high-sulfur barrels from the global slate, potentially widening the price spread between heavy and light crudes in the year ahead.
Saudi Arabia is aggressively cementing its foothold in Asia’s downstream market to future-proof demand for its crude. The flagship example is Saudi Aramco’s plan to acquire a 20% equity stake in a new $11 billion refinery and petrochemical complex in India. The project, led by state-run Bharat Petroleum Corp Ltd (BPCL), will be built at Ramayapatnam on India’s east coast (Andhra Pradesh) and is slated to process up to 240,000 barrels per day of crude. By taking a significant minority stake, Aramco would secure rights to supply a large portion of the refinery’s feedstock, effectively locking in a dedicated customer for decades.
BPCL, India’s second-largest state refiner, has earmarked 6,000 acres for this greenfield complex and aims to have it operational by January 2029. The Indian firm intends to offer 30–40% of the project’s equity to outside partners, with Aramco getting the lion’s share (20%) and smaller stakes for India’s Oil India Ltd (~10%) and possibly local banks. For Saudi Aramco, this investment is not just equity ownership – it is a strategic placement of Saudi crude in India’s energy mix. By investing in India’s downstream, Aramco secures a guaranteed outlet for its oil, shielding its sales from competing suppliers and volatility. This comes as India has even surpassed China as the single largest driver of oil demand growth in recent years, making it a critical market for oil exporters.
The Aramco-BPCL venture underscores a broader macro trend: India is the new epicenter of oil demand growth. With a young population and growing economy, India’s oil consumption is set to rise faster than any other country’s, filling the gap left as China’s demand growth matures. For Riyadh, this pivot eastward is essential to its strategy of demand security – ensuring there will be steady long-term buyers for Saudi oil.
Downstream Shift: Notably, over 80% of new global refining capacity in the next decade is expected to come online in Asia and the Middle East, fundamentally shifting the industry’s center of gravity eastward. While Western oil majors are rationalizing or converting refineries (some turning to biofuels or shutting units in Europe and North America), state-backed players in India, China, and the Gulf are adding capacity. This means the marginal barrel of oil is increasingly likely to be processed in an Asian or Middle Eastern refinery. By securing a stake in India’s expansion, Saudi Aramco is aligning with this reality – it ensures Saudi crude will have access to the very refineries that represent future demand growth.
Geopolitical Alignment: For New Delhi, welcoming Saudi investment serves a dual purpose. It diversifies India’s sources of crude (hedging against over-reliance on any single supplier or the spot market) and deepens ties with a major Gulf producer. This is significant given India’s recent buying of discounted Russian oil; having Aramco on board could balance India’s oil portfolio and perhaps give it leverage in pricing negotiations. In effect, India gains a stable supply from a friendly nation, and Saudi Arabia secures a loyal buyer. This partnership exemplifies how energy security concerns are driving alliances: producers seek guaranteed markets, while importers seek reliable supply – a classic symbiosis reshaping global oil flows.
In a surprising turn of events, California’s offshore oil is getting a second lease on life. A U.S. federal appeals court (Ninth Circuit) has given Sable Offshore Corp. the go-ahead to restart the long-contested Las Flores Pipeline system. This pipeline is the critical link connecting Sable’s three Santa Ynez Unit platforms (off Santa Barbara’s coast) to onshore processing and distribution facilities. It was shut down in 2015 after a rupture and spill, and regulatory and legal battles have kept it offline since. Environmental groups sought to block the reactivation, but they lost their bid to stay the pipeline’s emergency restart permit. The court’s December 31 decision effectively greenlights Sable to resume pumping oil to shore after a decade of limbo.
The ruling represents a significant victory for the operator and a broader signal in the policy arena. California is known for its stringent environmental stance – outright banning new offshore drilling and pushing aggressive carbon-neutral goals. That a court would side with an oil operator, even on an existing asset, highlights the legal system’s recognition of certain property and contract rights despite political headwinds. It helps that this is existing production infrastructure (once owned by ExxonMobil) being reactivated, not a new project, and the Pipeline and Hazardous Materials Safety Administration (PHMSA) had issued a special permit deeming the restart an “emergency” to prevent energy supply disruption. In short, pragmatism gained an edge over ideology in this case.
The restart of Las Flores Pipeline comes at a critical time for California’s energy supply. Years of declining local oil output and refinery closures have made California increasingly dependent on imported oil and fuels. Over 70% of the crude oil refined in California now comes from outside the state, delivered via marine tankers from Ecuador, the Middle East, and elsewhere. This import dependency has grown as in-state production declines ~5–7% annually and as some California refineries convert to renewable fuels. The result is a structural vulnerability: the state relies on long supply chains (and often OPEC+ producers) for the majority of its transport fuel needs, even as it champions clean energy at home. This situation has raised concern that California’s energy security is at risk – price spikes and supply crunches could occur if global markets tighten or if there are shipping disruptions.
The Import Trap: The question is whether reopening a domestic source of crude can meaningfully improve this security. Santa Ynez’s offshore production, while modest (previously around 30,000–40,000 bpd), could replace a slice of imports with local barrels. This offers some insulation from global price premiums and maritime bottlenecks. However, even with Las Flores online, California will remain largely at the mercy of external suppliers for the foreseeable future. Decades of policy choices have created an environment where major new oil developments onshore or offshore are virtually impossible, so the state’s structural dependency on imports will persist unless those policies change.
Strategic Value: Nonetheless, the legal precedent of the Las Flores case has strategic implications. It shows that when push comes to shove, maintaining a baseline of domestic production can outweigh absolutist environmental opposition – at least in the courts. For California refineries, any additional local crude is beneficial: it reduces the cost and time of shipping oil from abroad and could slightly widen their feedstock options. Moreover, from a national perspective, keeping these offshore platforms active contributes to U.S. energy output in a region otherwise tapering off. In a way, California’s predicament underscores a larger theme: even as the energy transition progresses, traditional oil infrastructure still underpins security in fuel supply, and completely shutting it down can carry economic and geopolitical risks. The state may not reverse course on its climate agenda, but this episode suggests a recognition that a measured approach is necessary to avoid supply shortfalls.
The early 2026 story of oil markets is a study in contrasts between hard power and soft demand forces:
For investors and market observers, these disparate events carry a unifying takeaway: the global oil balance is tightening, especially for heavier grades. Venezuela’s Orinoco shut-ins are turning what was once considered temporary offline capacity into potentially permanent losses. At the same time, new refining capacity in Asia (like the BPCL project) is configured to process exactly those types of heavy, sour crudes. This dynamic sets the stage for increased competition over the remaining heavy barrels from the likes of Canada’s oil sands, Middle Eastern heavy oil, and Mexico’s Maya crude. We can expect the price spread between heavy and light crude oil to widen if this trend continues, as refiners pay a premium to secure the dense crude their facilities are designed for. In essence, hard-power geopolitics in one part of the world (reducing supply) combined with hard-asset development in another (boosting demand) could create an underpinning for oil prices in 2026 – even as the broader energy transition narrative carries on. The beginning of 2026 thus serves as a reality check: despite talk of peak demand and green energy, control over physical oil flows remains a decisive factor in geopolitical and market outcomes
Bass Energy & Exploration is independently owned and operated by the Bass family.
Bass Energy & Exploration
7 NE 6th Street
Oklahoma City, OK 73104