US likely to renew Chevron waiver for Venezuela

Spanish Market: Crude oil, Oil products
13/05/21

The US government is likely to renew Venezuela sanctions waivers for Chevron and four oil services companies as the White House reviews its broader policy toward Caracas, sources close to the process tell Argus.

The waivers allowed Chevron and services companies Schlumberger, Halliburton, Baker Hughes and Weatherford to continue operating in Venezuela after the previous US administration imposed oil sanctions on the Opec country in January 2019, with the goal of forcing President Nicolas Maduro out of power in favor of opposition leader Juan Guaido. As Maduro clung on and Guaido's support withered, the waiver conditions were tightened in April 2020 to allow the companies to preserve their assets but without maintaining them or paying local employees.

The current waivers lapse in early June. By the end of May the US is expected to roll them over for three or six months more, prolonging a status quo approach on an issue that President Joe Biden's administration does not view as a foreign policy priority. A restoration of the original waiver conditions which allowed Chevron to lift Venezuelan oil is possible, but much less likely than a simple rollover for now, Venezuela watchers say.

The White House inherited the sanctions from the administration of president Donald Trump, whose hawkish stance failed to dislodge Maduro but did help to win him political support among the country's burgeoning diaspora in November 2020 elections that he nonetheless lost. Current US officials have repeatedly signaled they are in no rush to change course on Venezuela while the Biden administration focuses on more pressing overseas issues such as China and the Middle East.

In Caracas, the US reluctance to act swiftly on Venezuela — even in the face of changing conditions — is underestimated by the government and its opponents alike. In recent weeks, Maduro has taken conciliatory steps, such as moving six jailed executives of state-owned PdV's US refining arm Citgo into house arrest. In a bid to regain political relevance and deflect blame for problems on the ground such as fuel shortages that sanctions have aggravated, Guaido this week indicated a willingness to negotiate with the government to bring about credible presidential elections, effectively burying his vaunted "end of the usurpation" strategy.

In Washington, some members of the progressive flank of Biden's Democratic party are pressing the administration to ease sanctions, backing calls to restore diesel swaps by non-US oil companies, but traction remains limited.

Resistance to compromise

Both Maduro and Guaido face resistance to further compromise in their own camps. This resistance is reflected in behind-the-scenes moves to reform Venezuela's hydrocarbons law to allow PdV's foreign partners, most notably Chevron, to have a controlling stake in oil joint ventures, on the understanding that the national oil industry cannot recuperate without large-scale foreign investment. Maduro set the ball in motion last year with "anti-blockade" legislation aimed at bringing back investors. But nationalistic members of the governing united socialist party (PSUV) reject any perceived revival of the 1990s "apertura" policy, which opened Venezuela back up to foreign oil investment. The main Orinoco heavy oil belt projects that grew out of that ill-fated policy — including Chevron's rebranded PetroPiar — were nationalized a decade later.

On the opposition side, hardliners oppose any softening of sanctions or return of oil companies before Venezuela undergoes a comprehensive political transition, starting with credible presidential elections on an accelerated timetable. Although state and municipal elections are scheduled for later this year, the next presidential elections are not scheduled until 2024. On the oil legislation, Maduro's main opponents maintain that Venezuela needs a new hydrocarbons law altogether to bring the country up to date on fiscal terms, regulation and environmental conditions.

Stay lady stay

For now, Chevron is hoping to stay in Venezuela in anticipation of a future revival of its operations. "Our legacy in Venezuela dates back to the 1920s and we remain hopeful that General License 8 will be renewed to continue our long constructive history in the country, where we support social investment programs that provide needed services for local communities," Chevron told Argus. The company says it has spent more than $100mn toward "diverse social initiatives" in Venezuela in the last 10 years, and remains "committed to the safety and wellbeing 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."

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 last year. Chevron has 30pc of PetroPiar and 39.2pc of PetroBoscan. The company also has 34pc of the PetroIndependencia joint venture in the oil belt, and 25.2pc of PetroIndependiente in the west. And on the maritime border with Trinidad and Tobago, Chevron has 60pc of the Loran natural gas field.

Chevron highlights its modest operational role in Venezuela even when it was still an active participant. Its net share of production from joint ventures averaged around 35,300 b/d of oil equivalent (boe/d) in 2019, representing just 6pc of Venezuela's total production at the time.

Venezuela is currently producing around 500,000 b/d of crude, around the same as last year and down from about 820,000 b/d in 2019, according to Argus estimates.

By Patricia Garip

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07/11/24

US extends oil service firms' Venezuela waiver

Washington, 7 November (Argus) — The outgoing administration of US president Joe Biden extended authorization for oilfield services companies Halliburton, SLB, Baker Hughes and Weatherford to continue working in Venezuela until 9 May 2025. The waiver allows the service companies to pay their staff and maintain limited operations, but it prevents them from drilling new wells or otherwise contributing to state-owned PdV's production and exports. The Biden administration reimposed sanctions on Venezuela's oil sector in April, after a six-month reprieve. The sole exemption is a waiver for Chevron allowing it to import oil into the US from its joint venture with state-owned PdV. US crude imports from Venezuela averaged 212,000 b/d in January-August, US Energy Information Administration data show. Chevron's Venezuela output has stood at about 200,000 b/d. Neither president-elect Donald Trump nor his campaign addressed the Venezuela sanctions regime or indicated if they would change it. Republicans in Congress ahead of the election called for the Chevron exemption to be revoked. The Biden administration separately extended a prohibition for holders of $3.4bn in PdV 2020 bonds guaranteed by 50.1pc in US refiner Citgo's holding company to exercise their claim, this time until 7 March 2025. The PdV bondholders in theory hold a superior claim to Citgo Holding — a legal entity that directly owns Citgo and, in turn, is owned by Citgo parent company PdVH. A federal court in Delaware recently oversaw an auction of PdVH shares that yielded a $7.3bn bid from a company backed by investors including Elliott Investment Management. Legal wrangling over the bids and the distribution of auction proceeds is likely to keep Citgo ownership unresolved in the near term. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Mexican peso plummets on Trump win

06/11/24

Mexican peso plummets on Trump win

Mexico City, 6 November (Argus) — The Mexican peso fell sharply against the US dollar as markets priced in potential retaliation against Mexico following former president's Donald Trump's victory in the US presidential election. "A Republican Senate majority and potential House win raise the chances of Trump's radical reforms, which could hurt Mexico's economic dynamism," said a financial analyst from Mexican bank Monex in a note today. The peso initially dropped around 3pc to Ps20.71/$1 early today, hitting a two-year low before recovering to Ps20.20/$1 by midday. The peso may weaken further, as Mexico is vulnerable to tariff hikes amid strained relations over issues like immigration and the opioid crisis, according to a desk report from a major Mexican bank. Trump repeatedly threatened tariffs on Mexico during his presidential campaign, most recently pledging a 25pc tariff on all Mexican imports unless President Claudia Sheinbaum's administration launches a severe crackdown on Mexico's drug cartels, which ship fentanyl and other drugs across the border to the US. Recent constitutional amendments in Mexico, including judicial reforms and proposed eliminations of independent regulators, may also add downward pressure on the peso, according to the report. "The government's goal to direct private-sector involvement could limit market forces," it noted. Mexico's state-owned oil company Pemex typically offsets peso depreciation due to its dollar-denominated oil export revenues, which help cover increased import costs. "Pemex's exports and domestic sales are tied to international hydrocarbon prices, providing a natural hedge," the company stated in its most recent report. Still, analysts warn that Pemex's focus on domestic refining over crude exports could erode this hedge, leaving it more exposed to foreign exchange swings on USD-denominated debt. By Édgar Sígler Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop 29 finance talks need leadership after Trump win

06/11/24

Cop 29 finance talks need leadership after Trump win

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Iran sounds alarm on gasoline shortage

06/11/24

Iran sounds alarm on gasoline shortage

Dubai, 6 November (Argus) — The new Iranian government has sounded the alarm on an emerging gasoline shortage that looks set to get worse unless new policies are introduced to clamp down on runaway demand growth. Presenting a draft budget for the Iranian year starting on 20 March 2025, Iran's President Masoud Pezeshkian criticised the existing gasoline rationing system, calling it one of the major hurdles for the proposed bill. Iran has, since 2007, allowed citizens to buy base levels of gasoline at subsidised prices and any additional at a higher price. But the system failed to cap demand and imports sufficiently. In the proposed budget the government has signalled plans to ease shortages, but increasing prices is not on the agenda. A cut to subsidies in 2019 sparked nation-wide protests . "Today the cost of [producing] gasoline — which includes refining costs, transportation costs, and gas station maintenance costs — is about 8000 tomans (80,000 rials)," Pezeshkian said. But consumers only pay 7.5pc of the actual price of gasoline, according to Iran's oil ministry. Iran's gasoline consumption has reached a record high of around 750,000 b/d in the first seven months of the Iranian year that began on 20 March, according to the ministry. Domestic refinery capacity of 670,000 b/d has been unable to satisfy this. To bridge the gap Iran has turned to imports, which has not been easy for the heavily sanctioned country that buys the fuel at market prices. "Around 90 trillion tomans [$1.3bn at the free market rate] was spent to import gasoline this year, which could be increased to 130 trillion tomans [$1.9bn] next year if the [demand growth] trend continues," Pezeshkian warned. Supply-side response If Tehran is unwilling to raise pump prices it will have to add more supply. Work in underway to bringing online an additional fourth train at the Persian Gulf Star (PGS) condensate splitter, and on a 60,000 b/d splitter that made up just one part of the now shelved Siraf project. Consultancy FGE expects these projects to be commissioned by the end of 2025 or early 2026 and "potentially close the gap." The newly-appointed head of state-owned refining company NIORDC, Mohammad Sadegh Azimifar, said using CNG-powered vehicles could reduce the need for more gasoline production. "There are good legal capacities in the country for the development of CNG, including the approval of the energy optimization fund," he said. But CNG has lower mileage and energy content, and CNG filling stations are beset with long queues. "If you have a CNG car, you can only drive it for a day and one will have to wait in long queues to get it refilled, only for it to last for another day", said FGE's Middle East managing director Iman Nasseri. Iran has sufficient reserves of natural gas and LPG, but both of these failed to emerge as a good alternative fuel, he said. The Pezeshkian administration has repeated calls to increase use of public transport and modernise the country's vehicle fleet. But metros and buses are being utilised at maximum capacity and private vehicles are a favourable option in a country with the second-most discounted fuel prices in the world, Nasseri said. Iran is yet to tackle rampant fuel smuggling, with market sources indicating gasoline continues to be illegally shipped to neighbouring countries like Pakistan, Afghanistan and Kazakhstan. Earlier this week, authorities seized around 220,000l of smuggled fuel in several warehouses in Mashhad. While the administration strongly rebukes subsidies, with new vice president Mohammad Reza Aref calling them "unreasonable", they continue to look at solutions that does not include any increase in retail prices, in fear of a repeat of the 2019 protests. But with a lack of infrastructure to capitalize on CNG and limitations in public transportation system, the government may have no choice but to reconsider. By Rithika Krishna Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Iraq proposes doubling payment for KRG crude

06/11/24

Iraq proposes doubling payment for KRG crude

Dubai, 6 November (Argus) — Iraq's government has proposed doubling the amount it pays the Kurdistan Regional Government (KRG) for crude production and transportation costs, as it seeks a compromise aimed at resuming exports from the semi-autonomous northern region. The government on 5 November approved an amendment to the three-year budget passed in 2022, setting compensation at $16/bl. But this remains $10/bl below the KRG ministry of natural resources' calculation of production costs in contracts it signed with international oil companies (IOCs) operating in Iraqi Kurdistan. "The KRG is not yet on board with the new arrangement," a senior Iraqi source with knowledge of the matter told Argus . Another source, with knowledge of IOC thinking, described the move as "a positive development" and said companies are "waiting to see what the Iraqi parliament decides." Parliament must ratify the amendment. The amendment stipulates "production and transportation costs for each field will be estimated fairly by an internationally specialised consulting entity" to be selected mutually by Iraq's oil ministry and the KRG's ministry of natural resources within 60 days. "If no agreement is reached within this period, the Federal Council of Ministers will determine the consulting entity," the government said. Parliamentary finance committee member Narmin Maarouf said the decision is "an important step to resolve one of the outstanding issues between the Kurdistan region and Baghdad." Iraqi prime minister Mohammed Shia al-Sudani has been working on a middle ground agreement that would allow it to pay IOCs operating in Kurdistan in return for a compromise with the KRG and the IOCs over the recovery cost for oil produced in the region. In this case, the KRG has to hand over its crude oil production to state-owned marketing firm Somo. A senior Iraqi government official said told Argus the result of the US presidential election may shift things in Iraq, "but the decision is clear, the Iraqi government wants to solve the issue." Around 470,000 b/d of crude exports from Kurdistan have been absent from international markets since March 2023, when Turkey closed the pipeline linking oil fields in northern Iraq to the export terminals at Ceyhan. That followed an international tribunal ruling that said Ankara had breached a bilateral agreement with Baghdad by allowing KRG crude to be exported without the federal government's consent. Iraq's federal government is finding it difficult to strike a balance between repairing its rift with the KRG and complying with its Opec+ commitments. But the KRG "cannot immediately resume exporting around 400,000 b/d," the Iraqi source said. By Bachar Halabi Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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