Chevron Corp on Saturday received an extended license allowing it to resume production of petroleum in Venezuela and import crude, after the Venezuelan government and opposition said they were returning to political talks.
The decision allows Chevron revive existing oil projects in the sanctioned country and bring new supplies of crude oil to US refineries. However, it restricts cash payments to Venezuela, which could reduce the amount of oil available to Chevron.
The terms of the license are designed to prevent Venezuelan state oil company PDVSA from profiting from Chevron’s Venezuelan oil sales, U.S. officials said. The leave lasts for six months, according to the U.S. Treasury Department.
The U.S. authorization “brings greater transparency to the Venezuelan oil sector” and allows Chevron to benefit from sales of “oil that are currently being produced” in joint ventures with PDVSA, the California-based company said in a statement.
Following oil sanctions on Venezuela in 2019, Chevron received an exemption to market its Venezuelan crude in order to recover outstanding debts. But those privileges were suspended a year later. PDVSA’s four joint ventures with Chevron were producing about 200,000 barrels per day (bpd) of oil before Washington’s measures.
The United States issued the license on the same day Venezuela and opposition leaders began a political dialogue in Mexico City in which they agreed to ask the United Nations to manage a fund to help provide food, health care and infrastructure to Venezuelans.
“This action reflects the longstanding policy of the United States to provide targeted sanctions relief based on concrete measures that alleviate the suffering of the Venezuelan people and support the restoration of democracy,” the Treasury Department statement said.
The terms prohibit Chevron from helping Venezuela develop new oil fields, but offer a way for the company to recover some of the billions of dollars owed by PDVSA through oil sales. It also allows the U.S. company to import supplies to help process heavy crude.
To oil services firms Baker Hughes, Halliburton Schlumberger and Weatherford International had their licences renewed, but without extension. That limits any expansion of Venezuelan oil production.
Spokesmen for the four companies, only two of which still have teams in the South American country, did not immediately respond to requests for comment or did not immediately comment.
The United States said it reserved the right to terminate or revoke the license at any time. A spokesman insisted the authorization was not a response to the sharp rise in crude prices this year.
The authorization could provide new supplies of crude to a market now struggling to replace Russian barrels rejected by Western buyers following the invasion of Ukraine. Chevron and other U.S. oil refiners could benefit from heavy oil from Venezuela flowing into their processing plants on the U.S. Gulf Coast.
Analysts warned that Venezuelan President Nicolas Maduro is likely to be upset by the restrictions included in the license, including the lack of cash payments his administration sought. Profits owed to Venezuela from Chevron’s oil sales would go to a humanitarian fund instead of state-owned PDVSA.
The terms will “require significant reporting by Chevron on the financial operations of its 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 big short-term incentive” for Venezuela, said Francisco Monaldi, an expert on Latin American energy policy at Rice University’s Baker Institute for Public Policy. The terms could relax over time depending on how the talks unfold in Mexico City.
“We will see how the Maduro government reacts and how many shipments will be allocated to Chevron afterwards,” he said.
Venezuela has about 300 billion barrels of oil reserves, the largest in the world, but has been unable to reach its production targets due to lack of investment, poor maintenance, lack of supplies and U.S. sanctions.