The US is ready to authorize Chevron to increase oil production in Venezuela


  • The US is ready to allow the oil giant to produce and sell Venezuelan oil
  • Chevron owes billions in unpaid debts from state-owned PDVSA
  • The US is seeking to shift sales of Venezuelan oil away from shady firms

HOUSTON, Nov 23 (Reuters) – Chevron Corp may soon win U.S. approval to expand operations in Venezuela and resume trading in its oil after Venezuela’s government and its opposition resumed political talks, four people familiar with the matter said on Wednesday with the question.

U.S. approval for Chevron to help restore the country’s declining oil production has been one of the biggest obstacles to holding talks between Venezuela’s government and its opposition.

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

Both Venezuelan parties and U.S. officials are pushing for talks in Mexico City this weekend, the people said, the first since October 2021. Maduro has gained influence this year with newly elected leftist leaders in Brazil and Colombia and waning opposition support.

Chevron declined to comment on the expected approval or the terms. The No. 2 U.S. oil firm continues to comply with the terms of its existing license, a spokesman said. The license allowing maintenance operations expires on December 1.

LICENSE TERMS

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

White House officials are seeking to “redirect oil sales from illegal and opaque channels to transparent, legal channels,” the person said. The United States could revoke the 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 assistance based on concrete steps that alleviate the suffering of the Venezuelan people and move them closer to restoring democracy,” a US State Department spokesman said.

US President Joe Biden’s administration has reason to grant Chevron a broader operating license as US shale output growth slows, Russian oil exports shrink under sanctions and Saudi Arabia signals possible output cuts OPEC.

This year, the United States kept oil prices from rising by releasing more than 200 million barrels from the nation’s emergency oil reserves. But these editions should end soon.

SCORE BEFORE SANCTIONS

The Biden administration has signaled that any easing of sanctions on Venezuela, including granting Chevron a broad license to revive oil production and restore trade privileges in Venezuela, will come only if the two countries make progress in political talks.

The US Treasury may issue a new license on Monday or Tuesday. The expanded terms will not be a response to energy price concerns, 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. Combined, the companies were producing about 200,000 barrels per day (bpd) before US sanctions and a lack of funding cut output.

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

Following oil sanctions against Venezuela in 2019, Chevron was granted an exemption to trade its Venezuelan crude to repay billions of dollars in outstanding 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 looking more urgently at Chevron’s request to expand operations as Washington sought oil to replace supplies hit by sanctions against Russia as well as OPEC’s decision to cut production.

MOUNTING PRESSURE

In recent weeks, representatives of Maduro and the opposition have 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 are skeptical that Maduro is willing to negotiate in good faith and oppose easing sanctions unless he gives something in return.

A growing number of oil firms are exiting joint ventures with PDVSA due to mounting debt and frozen operations. The contraction positions Chevron as the only remaining strong partner that could revive output, expected 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 largest in the world, but has failed to meet its production targets due to underinvestment, poor maintenance, lack of supplies and US sanctions.

(This story has been revised to add the missing word “cuts” in paragraph 6.)

Reporting by Mariana Paraga in Houston; Additional reporting by Sabrina Valle, Matt Spetanik and Vivian Sekera; Editing by Gary McWilliams and Josie Kao

Our standards: The Thomson Reuters Trust Principles.

Mariana Paraga

Thomson Reuters

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

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