Chevron can resume a key role in Venezuela’s oil production and exports

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WASHINGTON/HOUSTON — Chevron Corp on Saturday received a U.S. license allowing the second-largest U.S. oil company to resume production in Venezuela and ship crude oil from the South American country to the United States.

The decision grants sweeping rights to the last major US oil company still operating in US-sanctioned Venezuela. However, it limits any cash payment to Venezuela, which could reduce the amount of oil available for export.

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The terms of the license are designed to prevent state oil company Petróleos de Venezuela, SA, known as PDVSA, from receiving proceeds from Chevron’s oil sales, U.S. officials said. The license lasts for six months and will automatically renew every month thereafter, the US Treasury said.

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The US authorization « brings more transparency to the Venezuelan oil sector » and allows Chevron to benefit from sales of « currently produced oil » by its joint ventures with PDVSA, the Californian company said in a statement.

POLITICAL TALKS

Following oil sanctions against Venezuela in 2019, Chevron received an exemption to trade its Venezuelan crude to recover outstanding debts. But these privileges were suspended a year later. Chevron’s four PDVSA joint ventures produced about 200,000 barrels of crude oil a day and exported the crude around the world before the sanctions.

The United States issued the license the same day that Venezuela and opposition leaders began a political dialogue in Mexico City agreeing to ask the United Nations to oversee a fund providing food, health care and supplies. infrastructure to Venezuelans.

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The terms prohibit Chevron from helping the OPEC member develop new oil fields, but offer the company a way to recoup some of the billions of dollars owed by PDVSA through oil sales. It also allows the American company to import supplies to help turn the country’s crude oil into exportable qualities.

The United States, which first imposed sanctions on PDVSA in 2017, said it reserves the right to cancel or revoke the license at any time. A spokesman insisted the clearance was not a response to soaring energy prices this year.

« This action reflects the long-standing U.S. policy of providing targeted sanctions relief based on concrete actions that alleviate the suffering of the Venezuelan people and support the restoration of democracy, » the U.S. Treasury Department said in a statement.

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Over the years, the United States has tightened sanctions against Venezuela, seeking to oust socialist President Nicolas Maduro for his 2018 re-election, which was not recognized by the West. Maduro clung to power with the help of PDVSA, Russia and Iran.

Maduro gained new influence with the rise of leftist leaders in Latin America and a fractured opposition struggling with a lack of funds, and with leaders exiled or imprisoned.

US officials visited Caracas this year and held talks that led to

the release of seven Americans

detained in Venezuelan prisons in exchange for the release of two relatives of Maduro detained for drug trafficking.

AMERICAN REFINERS

The clearance provides limited new supplies of crude to a market struggling to replace the Russian barrels shunned by Western buyers during its invasion of Ukraine. Chevron and other U.S. oil refiners could benefit from supplies of Venezuelan heavy crude flowing to their processing plants on the U.S. Gulf Coast.

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Analysts have warned that Maduro is likely to bristle at licensing restrictions, including the lack of cash payments his administration has been seeking.

The authorization prohibits any payment of oil royalties and taxes to the Venezuelan government, or any payment in kind to PDVSA. It also prohibits Chevron from entering into transactions with Russian-controlled companies operating in Venezuela.

The terms « will require significant reporting by Chevron on the financial operations of their joint ventures to ensure transparency, » a U.S. official said, adding that other sanctions against Venezuela and its officials remain in place.

« There’s no great short-term incentive » for Venezuela, said Francisco Monaldi, a Latin American energy policy expert at Rice University’s Baker Institute of Public Policy. The terms could be relaxed over time, he added.

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“We will see how Maduro’s government reacts to it and how many shipments will then go to Chevron,” Monaldi said.

Earlier this year, the United States began considering Chevron’s request to expand operations with greater urgency as Washington seeks oil to replace supplies hit by sanctions against Russia following its invasion of the United States. Ukraine and more recently when OPEC cut production.

Venezuela holds around 300 billion barrels of oil reserves, the largest in the world, but has been unable to meet its production targets due to underinvestment, poor maintenance, lack of supplies and US sanctions.

(Reporting by Marianna Parraga and Daphne Psaledakis; Writing by Gary McWilliams; Editing by Marguerita Choy and Richard Chang)