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.
