Chevron Corp could win U.S. approval to vastly expand operations in Venezuela as soon as Saturday once the Venezuelan government and its opposition resume political talks, three people familiar with the matter said on Wednesday.
By Reuters – Marianna Parraga
Nov 23, 2022
A U.S. authorization for Chevron <CVX.N> to help rebuild the country’s sagging oil production was one of the biggest plums for bringing about talks between the Venezuelan government and its opposition.
U.S. officials this year sought to smooth a return to negotiations between socialist President Nicolás Maduro and the country’s opposition by offering a slight easing of sanctions and releasing some Venezuelans in U.S. jails.
Both Venezuelan parties and U.S. officials are pushing to hold talks in México City this weekend, the people said, the first since October 2021. Maduro gained clout this year with newly elected leftist leaders in Brazil and Colombia and the opposition’s weakening support.
Chevron and the U.S. Treasury did not have an immediate comment.
“The United States believes we must support the people of Venezuela and their democratic aspirations,” said a spokesperson for the U.S. State department.
Whether State will support an expanded license for Chevron, the spokesperson added: “We have long made clear our willingness to provide targeted relief based on concrete steps that alleviate the suffering of the Venezuelan people and bring them closer to a restoration of democracy.”
U.S. President Joe Biden’s administration has reason to grant a wider license with U.S. shale production gains slowing, Russia’s oil exports shrinking under sanctions and Saudi Arabia signaling possible OPEC output cuts.
The United States this year has kept oil prices from soaring by releasing more than 200 million barrels of the nation’s emergency oil reserves. But those releases are due to end soon.
Biden’s administration had signaled any easing of Venezuela sanctions, including granting Chevron a broad license to revive oil output and regain trading privileges in Venezuela, would come only if the two sides had progressed in political talks.
The U.S. Treasury could issue a new license on Monday or Tuesday before the Dec. 1 expiry of Chevron’s existing license, the people said. The company’s joint ventures with Venezuelan state oil-firm PDVSA had produced about 200,000 barrels per day (bpd) before U.S. sanctions and lack of financing cut their output.
However, if talks do not take place this weekend, the United States could renew the existing license to allow Chevron to maintain its Venezuelan assets without any operational or commercial expansion, the people said.
That outcome would leave the door open to the United States later amending Chevron’s license if Venezuela makes progress toward an election, said one person in Washington familiar with the matter.
“A range of options” remain under consideration, that person said.
Chevron is a partner with PDVSA in several joint ventures that pump and process crude oil for export. PDVSA did not respond to requests for comment about the deliberations.
Following oil sanctions on Venezuela in 2019, Chevron got an exemption to trade its Venezuelan crude to recoup billions of dollars in pending debt. Those privileges were suspended by then President Donald Trump a year later as part of his “maximum pressure” strategy to oust Maduro, whose 2018 re-election was not recognized by the West.
The United States this year began considering Chevron’s request to expand operations with more urgency as Washington sought oil to replace supplies hit by sanctions on Russia as well as OPEC’s decision to cut output.
In recent weeks, Maduro representatives and the opposition held discussions in Paris under the auspices of the presidents of France, Colombia and Argentina to break the political deadlock.
In Washington, Republicans and some of Biden’s fellow Democrats have been skeptical Maduro is ready to negotiate in good faith and are opposed to relaxing sanctions unless he gives something in return.
A U.S. official, speaking on condition of anonymity, said the administration takes a “clear-eyed view” of Maduro, but does not want to rule out any options.
A growing number of firms are leaving joint ventures with Venezuela’s state company PDVSA over mounting debt and frozen operations. The portfolio shrink positions Chevron as the only strong partner left that could revive output, set to fall this year to about 650,000 bpd, below the official target of 2 million bpd.
Venezuela holds about 300 billion barrels of oil reserves, the world’s largest, but has not been able to hit its production targets due to underinvestment, poor maintenance, lack of supplies and U.S. sanctions.