Chevron gets nod to resume Venezuela production
The Biden administration has granted Chevron a licence to resume oil production in Venezuela after US sanctions halted all drilling activities almost three years ago.
The reprieve followed the resumption of talks by Venezuela’s political factions on Saturday with a deal to work together on a humanitarian spending plan.
Chevron received a sixmonth licence from the US office of foreign assets control that authorises the company to produce crude oil and petroleum products in its projects in Venezuela, according to a general licence from the US treasury department. While no new drilling is authorised, the company will be able to repair and do maintenance of oilfields.
In 2020, before the US ordered a complete halt of drilling operations, Chevron’s share of Venezuelan crude oil production was 15,000 barrels a day, less than the production of a single oilfield in the US’s Permian Basin.
The Californian-based driller is also allowed to resume crude exports that were halted since 2019, when the US ratcheted up sanctions against Venezuela, an Opec producer. All exports should go to the US and the company will be allowed to import feedstocks, including diluents used to bolster crude production, from the US.
‘THE DECISION BRINGS ADDED TRANSPARENCY TO THE VENEZUELAN OIL SECTOR’
“The decision brings added transparency to the Venezuelan oil sector,” a Chevron representative said. “The issuance of general licence No 41 means Chevron can now commercialise the oil that is being produced from the company’s joint venture assets.”
The sanctions relief comes after Norwegian mediators announced the restart of political talks between President Nicolas Maduro and the opposition. The return of Venezuela to negotiations was a key condition for easing curbs on the oil-dependent nation’s crude production.
The licence should do little to alleviate an energy crisis that has sparked inflation and slowed growth globally, but advances the political agenda with the aim to set conditions for Venezuela’s 2024 presidential elections.
It might take “months and years to begin to maintain and refurbish fields and equipment and change any investment activity”, Chevron CEO Mike Wirth said in October.
Oil production in Venezuela has rebounded this year to 679,000 barrels a day, far less than the 2.9-million barrels produced a decade ago. Output slumped after sanctions and mismanagement of oilfields and refineries under the socialist rule of Hugo Chavez and Maduro.
Previous talks between Maduro and the opposition collapsed, most recently in October 2021. Interest in resuming negotiations has gained momentum as Venezuela faces increased competition by Russian and Iranian output in Asia, the top destination for its crude.
Venezuelan state-owned energy company PDVSA will not receive profits from the sale of oil, because proceeds will go towards repayment of old debt to Chevron. The US company will be prohibited from any transactions with Iran or dealings with Russian-owned or controlled entities in Venezuela.
The licence decision allows for US service oil providers Halliburton, Schlumberger, Baker Hughes and Weatherford International to restart work, the treasury said.