The US is ready to give Chevron permission to increase Venezuela’s oil production

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  • US ready to allow oil giant to produce, sell Venezuelan oil
  • Chevron owes billions in unpaid debt to state-run PDVSA
  • US aims to shift Venezuelan oil sales from shadow companies

HOUSTON, Nov 23 (Reuters) – Chevron Corp could soon win U.S. approval to expand operations in Venezuela and resume trading of its oil as the Venezuelan government and its opposition resume political talks, four people familiar with the matter said on Wednesday .

A US authorization for Chevron to help rebuild the country’s dwindling oil production was one of the biggest plums to spark negotiations between the Venezuelan government and its opposition.

U.S. officials tried this year to facilitate a return to talks between socialist President Nicolas Maduro and the country’s opposition by offering a small easing of sanctions and releasing some Venezuelans in U.S. prisons.

Both Venezuelan parties and US officials are pushing hold conversations in Mexico City this weekend, the people said, the first since October 2021. Maduro gained influence this year with newly elected leftist leaders in Brazil and Colombia and weakened opposition support.

Chevron declined to comment on the pending approval or terms. The No. 2 U.S. oil company is complying with the terms of its existing license, a spokesman said. A license allowing maintenance operations expires on December 1.

LICENSE TERMS

The terms up for approval would prevent Venezuela’s state-owned oil company PDVSA from receiving revenue from Chevron’s oil sales. And they will cut back on “the use of corrupt shadow companies that control the flow of Venezuela’s oil to countries like China,” said a person familiar with the matter in Washington.

White House officials aim to “shift oil sales from illegal and non-transparent channels to transparent, legitimate channels,” the person said. The U.S. could revoke permits if the Maduro administration fails to negotiate in good faith or honor its commitments, this person said.

“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 restoring democracy,” a US State Department spokesman said.

US President Joe Biden’s administration has reason to give Chevron a broader operating license with US shale production gains waning, Russia’s oil exports falling under sanctions and Saudi Arabia signaling possible OPEC production cuts.

The US has kept oil prices up this year by releasing more than 200 million barrels of the country’s emergency oil reserves. But these releases will end soon.

BEFORE SANCTIONS OUTPUT

The Biden administration had signaled that any easing of Venezuela sanctions, including giving Chevron a broad license to revive oil production and regain trade privileges in Venezuela, would come only if the two sides had moved forward in political talks.

The US Treasury may issue a new license on Monday or Tuesday. Extended terms would not be a response to concerns about energy prices, but reflect a desire “to support the restoration of democracy in Venezuela,” one of the people said.

Chevron partners with PDVSA in several oil joint ventures that pump and process crude oil for export. Together, the ventures had been producing about 200,000 barrels per day (bpd) before US sanctions and a lack of funding reduced their output.

PDVSA did not respond to requests for comment on the discussions.

Following oil sanctions against Venezuela in 2019, Chevron was granted a waiver to trade its Venezuelan crude to recover 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 US began considering Chevrons this year request to expand operations more urgently as Washington sought oil to replace supplies hit by sanctions against Russia as well as OPEC’s decision to cut production.

ASSEMBLY PRESSURE

In recent weeks, representatives of Maduro and the opposition have held talks 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 Democrats have been skeptical that Maduro is ready to negotiate in good faith and oppose relaxing sanctions unless he gives something in return.

A growing number of oil companies are exiting joint ventures with PDVSA due to mounting debt and frozen operations. The contraction positions Chevron as the only strong partner left that could revive output, which is set to fall this year to about 650,000 bpd, below the official target of 2 million bpd.

Venezuela has about 300 billion barrels of oil reserves, the world’s largest, but has been unable to meet its production targets due to underinvestment, poor maintenance, supply shortages and US sanctions.

(This story has been refiled to add the missing word “cut” in episode 6.)

Reporting by Marianna Parraga in Houston; Additional reporting by Sabrina Valle, Matt Spetalnick and Vivian Sequera; Editing by Gary McWilliams and Josie Kao

Our standards: Thomson Reuters Trust Principles.

Marianna Parraga

Thomson Reuters

Focused on energy-related sanctions, corruption and money laundering with 20 years of experience covering Latin America’s oil and gas industry. Born in Venezuela and based in Houston, she is the author of the book “Oro Rojo” about Venezuela’s troubled state-run company PDVSA and a mother of three boys.

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