Chevron gets a new US license to pump oil in Venezuela again

Biden administration officials said the license prevents PdVSA from receiving profits from oil sales to Chevron. The officials said the United States is ready to revoke or modify the license, which will be valid for six months, at any time if Venezuela does not negotiate in good faith.

said Senator Robert Menendez (D-Chair of the Senate Foreign Relations Committee).

The U.S. policy shift may signal an opening for other oil companies to resume business in Venezuela two years after the Trump administration imposed restrictions on Chevron and other companies’ activities there as part of a maximum pressure campaign aimed at toppling the Maduro government. But the Treasury action did not explain how non-US oil companies could re-do business with Venezuela.

Venezuela produces about 700,000 barrels of oil per day, compared to more than 3 million barrels per day in the 1990s. Some analysts have said Venezuela could reach 1 million barrels per day in the medium term, a modest increase that reflects the dilapidated state of the state-led oil industry.

The Wall Street Journal reported in October that the Biden administration was preparing to reduce sanctions against the Venezuelan regime to allow Chevron to resume pumping oil there.

Under the new license, administration officials said, profits from the oil sale would go toward paying off hundreds of millions of dollars in debt owed to Chevron by PdVSA. They said the US would require Chevron to provide details of its financial operations to ensure transparency.

Chevron spokesman Ray Vohr said the new license allows the company to market oil currently being produced at the joint venture’s assets. He said the company would conduct its business in compliance with the existing framework.

The license prohibits Chevron from paying taxes and royalties to the Venezuelan government, which has surprised some experts. They expected that the direct revenue would encourage PdVSA to redirect oil shipments away from opaque export channels, mostly to deeply discounted Chinese buyers, on which Venezuela has relied for years to avoid sanctions.

“If that’s the case, Maduro has little incentive to let that many Chevron shipments out,” said Francisco Monaldi, director of the Latin America Energy Program at Rice University’s Baker Institute for Public Policy. He said that sending oil to China, even at a deep discount, would be better for Caracas than simply paying off debts to Chevron.

The limited scope of Chevron’s license is seen as a way to ensure Mr. Maduro stays on the negotiating track. “Instead of opening the door fully for Venezuelan oil to flow into the US market immediately, what the license proposes is a path of normalization likely hinged on concessions from the Maduro regime on the political and human rights front,” Luisa Palacios said. Senior research fellow at Columbia University’s Center for Global Energy Policy.

The license allows Venezuelan oil to return to the United States, historically its largest market, but only if the oil from the joint ventures between PdVSA and Chevron is sold to Chevron and is not allowed to export from the projects’ to any jurisdiction other than the United States, which appears to be It restricts PdVSA’s share of sales in the US market, said Mr. Monaldi.

The license prohibits transactions involving goods and services from Iran, another oil producer that is subject to US sanctions against Venezuela and has helped Venezuela weather the sanctions in recent years. It also prohibits dealings with Venezuelan entities owned or controlled by it Russia recognized by the Westwhich also played a role in Venezuela’s oil industry.

Jorge Rodriguez, the head of the Maduro government’s delegation to the Mexico City talks, declined to comment on the issue of Chevron’s licence.

Freddy Guevara, a member of the opposition coalition delegation, said that the frozen funds estimated at $3 billion earmarked for humanitarian relief and infrastructure projects in Venezuela will be managed by the United Nations. He cautioned that it would take some time to fully implement the programme. “It starts now,” he said, “but the time period is up to three years.”

Venezuelan state funds frozen in offshore banks due to sanctions are expected to be used to alleviate the country’s health, food and electric power crises in part by building infrastructure for electricity and water treatment needs. “Not a single dollar will go into the regime’s coffers,” said Mr. Guevara.

Chevron plans to restore lost production while it does maintenance and other essential work, but it won’t attempt a major job that requires new investment in the country’s oil fields until $4.2 billion in debt is paid off. That could take about two to three years depending on oil market conditions, according to people familiar with the matter.

PdVSA owes Chevron and other joint venture partners their more than two years’ worth of revenue from oil sales, after 2020 U.S. sanctions prevented the Venezuelan company from paying its partners, one of the people said. The license would allow Chevron to collect its share of the dividends from its joint ventures such as Petropiar, in which Chevron has a 30% stake.

Analysts say the new agreement raises expectations that it will take time and work to achieve. Ensuring that the talks succeed will not be easy, but offering gradual sanctions relief in order to incentivize agreements is clearly the only way forward. “It’s a popping moment for negotiators, but there’s still a lot of work to do,” said Jeff Ramsey, Venezuela director in the Washington bureau for Latin America.

Jose de Córdoba and Genet González contributed to this article.

write to Colin Eaton at [email protected] and Andrew Restuccia at [email protected]