Venezuelan oil could return to U.S.

New deal restores vital stream of imports; how much Gulf refineries get is in question

WASHINGTON — Over the past three years, Venezuela’s oil exports to the United States plunged from more than 600,000 barrels a day to none at all after U.S. sanctions were imposed over President Nicolas Maduro’s efforts to stamp out political opposition.

Now with President Joe Biden deciding to allow Chevron to resume limited operations in Venezuela, refineries along the Gulf Coast could see the return of what had been a vital stream of oil.

It will not be immediate. The six-month license issued by the Treasury Department is only likely to result in 30,000 barrels a day of imports, considering the state of Chevron’s operations in Venezuela at present, said Marcelo De Assis, an analyst with the research firm Wood Mackenzie.

But if Venezuela carries through on the reforms agreed to in Mexico City over the weekend, production in Venezuela could reach 1.4 million barrels a day by 2030, double what it is now, according to a forecast by Wood Mackenzie.

“The market (in the Gulf) is still there. It would be quite a good option for American refiners because it’s such a heavy crude,” De Assis said. “But Venezuela will need a lot of investment to reach the previous levels.”

Venezuela was once one of the largest exporters of crude to the United States. The question hanging over the country’s oil fields, is whether the Maduro administration can maintain its improved relationship with the United States.

Democrats and the Biden administration are signaling they will have little patience if Maduro does not carry through the elections reforms and humanitarian aid to which he agreed.

Sen. Bob Menendez, chairman of the Senate Foreign Relations Committee, said in a statement over the weekend, “The United States and our international partners must snap back the full force of our sanctions”

if Maduro uses “these negotiations to buy time to further consolidate his criminal dictatorship.”

At the same time, higher gasoline prices have been an ongoing cause for concern within the Biden administration. Democrats may “see little political upside in keeping a hard line against Caracas when crude supplies are tight,” Kevin Book, managing director of Clearview Energy Partners, a Washington consulting firm, said in an email to clients Saturday.

“A combination of petroleum pragmatism and political change here in the U.S. could lead today’s liberalizations to become more durable than they might otherwise seem after the recent history,” he wrote.

Even so, Venezuela, which has the largest oil reserves in the world, needs to find foreign investors after years of chronic underinvestment by state-owned Petróleos de Venezuela.

With the exception of Chevron, U.S. firms have almost entirely pulled out of Venezuela after years of political instability, leaving oil fields there to the European oil companies Eni and Repsol, along with Chinese, Russian and Indian energy firms.

Venezuela will need about $5 billion a year in new investment over the next five years, if it is to expand production anywhere close to what it was three years ago, De Assis said.

“PDVSA is also funding the government and social spending, so they will need international investors,” he said.