US allows Chevron to lift Venezuelan oil: Update

Market: Crude oil
26/11/22

Adds comment, detail.

US president Joe Biden's administration will allow Chevron to sell crude cargoes from its joint ventures in Venezuela as a reward to Caracas for agreeing to resume talks between the government and political opposition.

The action will not significantly affect Venezuela's oil exports or global oil markets. Chevron's sales from its joint ventures with Venezuelan state-owned PdV amounted to 42,000 b/d in 2019, the last full year before Washington tightened restrictions on the terms of US companies operating in that country.

But the US Treasury Department's authorization, issued today, is the first significant step relaxing a sanctions regime imposed on Venezuela under former president Donald Trump.

"This action reflects longstanding US policy to provide targeted sanctions relief based on concrete steps that alleviate the suffering of the Venezuelan people and support the restoration of democracy," the US Treasury Department said today.

Venezuelan president Nicolas Maduro's government and an opposition alliance led by Juan Guiado agreed earlier this week to resume talks this weekend in Mexico City, nominally to agree on a path toward holding free and fair elections in 2024. The Maduro government and the opposition also backed a UN-administered program to provide food, medicine and other humanitarian goods to Venezuela.

Treasury released Chevron's license on a Saturday following the US Thanksgiving holiday on Thursday, underscoring the urgency of the matter to the US administration. And in a departure from previous waivers issued to US companies, Chevron's authorization to lift cargoes from Venezuela does not have an expiration date.

PdV is the majority shareholder in Chevron's oil assets, of which only PetroPiar and PetroBoscan in western Venezuela were active when the US company was forced to halt activities in 2020. Chevron has 30pc of PetroPiar and 39pc of PetroBoscan. The company also has 34pc of the PetroIndependencia joint venture in the oil belt, and 25pc of PetroIndependiente in the west. And on the maritime border with Trinidad and Tobago, Chevron has 60pc of the Loran natural gas field.

Treasury's license issued today allows Chevron to produce and sell crude cargoes from its joint ventures, but only to the US. Other US buyers will be allowed to import oil produced at PdV-Chevron joint ventures, so long as those cargoes are first sold to Chevron. And the US major will be allowed to export diluent, condensate and other oil products to Venezuela for use in production and lifting of oil from its joint ventures.

Treasury's license would still forbid Chevron paying royalties and taxes to the Venezuelan government or dividends to PdV. And Chevron will not be allowed to expand its presence in Venezuela beyond the joint ventures in place as of January 2019.

"It does not generate any real incentives for Maduro," Francisco Monaldi with Rice University's Baker Institute for Public Policy said.

A Chevron in-country representative told Argus before the licenses were announced that his company could add up to 200,000 b/d in 12 months if sanctions were eased, but output from some of Chevron's ventures have declined or hit zero in recent months.

"We are a constructive presence in Venezuela, where we have dedicated investments and a large workforce who are dependent on our presence," Chevron said on 23 November, before the Treasury license was issued. "We remain committed to the safety and well-being of our employees and their families, the integrity of our joint venture assets, and the company's social and humanitarian programs during these challenging times."

Treasury separately extended authorization for oil services companies Schlumberger, Halliburton, Baker Hughes and Weatherford to remain in Venezuela, until 26 May 2023.

US Senate Foreign Relations Committee chairman Bob Menendez (D-New Jersey), who previously opposed any form of sanctions relief for Venezuela, gave his grudging approval today. "If Maduro again tries to use these negotiations to buy time to further consolidate his criminal dictatorship, the US and our international partners must snap back the full force of our sanctions that brought his regime to the negotiating table in the first place," Menendez said.

By Haik Gugarats and Carlos Camacho

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