U.S. Poised to Grant Chevron License to Pump Oil in Venezuela

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The U.S. oil company would regain partial control of its oil-production and maintenance activities in dilapidated Venezuelan oil fields it has retained stakes in through joint ventures with the state-run oil company Petróleos de Venezuela SA. It wouldn’t make new investments there until certain debts are repaid, which could take years, according to people familiar with the matter.

Granting the new license is contingent on the Venezuelan government and its political opponents’ announcement, expected Saturday, to implement a $3 billion humanitarian program using Venezuelan funds unfrozen by the U.S. as well as an agreement to resume talks in Mexico City next month on resolving the country’s political crisis through free and fair elections, people familiar with the matter said. The talks would quickly set in motion U.S. authorization for Chevron’s return to Venezuela’s oil fields, according to the people.

“With the restart of the dialogue in Mexico, a road has been opened to the normalization of economic aspects of national life,” Venezuelan Vice President

Delcy Rodríguez

said Thursday at a meeting with business executives in Caracas.

In a written statement, Venezuela’s coalition opposition said Thursday it was ready to negotiate an agreement that would lead to a solution to Venezuela’s humanitarian crisis, the establishment of rule of law and the necessary conditions to hold free and verifiable elections.

The license, which isn’t permanent and would need future renewal, would return Chevron’s position in Venezuela to a sanctions framework similar to one in effect in 2019, before the Trump administration clamped down further on Chevron’s activities as part of a “maximum pressure” campaign aimed at ousting the government of Venezuela’s

Nicolás Maduro.

The Wall Street Journal reported in October the Biden administration was preparing to scale down sanctions on Venezuela’s authoritarian regime to allow Chevron to resume pumping oil there, paving the way for a potential reopening of international markets to oil exports from Venezuela.

President Biden said last month that the Energy Department will go ahead with sales of the last 15 million of 180 million barrels from the U.S. Strategic Petroleum Reserve he had authorized for sale. The move comes as part of a plan to reduce gas prices at the pump. Photo: Brendan Smialowski/AFP/Getty Images

Reuters reported earlier that Chevron could soon win U.S. approval to vastly expand operations in Venezuela.

“We have long made clear our willingness to provide targeted relief based on concrete steps that alleviate the suffering of the Venezuelan people and bring them closer to a restoration of democracy,” a spokesperson for the U.S. National Security Council said. “Any step taken is done in coordination with [Venezuela’s opposition coalition].”

Chevron spokesman

Ray Fohr

said the company was in compliance with the current sanctions framework. 

The developments come just ahead of new Western sanctions on Russian oil that threaten to tighten global supplies and lift prices. The Biden administration’s move to ease sanctions on Venezuela has been seen as an effort to send a well-timed psychological signal to markets concerned about a potential future shortfall.  

“With the price cap on Russian oil, supply is most likely going to be constrained further,” said

Ali Moshiri,

a former Chevron executive who oversaw the expansion of the company’s operations in Latin America and worked closely with Venezuelan officials. “Additional supply has to come from other sources, and Venezuela can be one of those sources that brings additional supplies.”

Mr. Moshiri is working as a consultant for Chevron in Venezuela.

At the expected meeting Saturday between the Maduro regime and Venezuela’s opposition coalition, known as the Unitary Platform, the parties are likely to announce an agreement on using about $3 billion of Venezuelan state funds frozen in overseas banks by sanctions to procure humanitarian aid and rebuild critical infrastructure for electricity and water- treatment needs, according to people familiar with the matter.

Also expected is an announcement that they will begin meeting in December to develop a timeline and framework to usher in political changes and hold presidential elections by 2024, the people said.

Any authorization provided by the Treasury Department would be time-limited and would prevent PdVSA, the state-run oil company, from receiving profits from the oil sales by Chevron, according to people familiar with the matter. The U.S. would retain the authority to amend or revoke authorizations if the Maduro regime doesn’t negotiate in good faith or follow through on its commitments, the people said.

For the Biden administration, U.S. domestic political blowback over the policy change is seen as manageable after the midterm elections, said people familiar with the matter, partly because Florida, whose large Cuban and Venezuelan communities support Venezuelan sanctions, is now seen as lost to the Republican Party.

Inside Venezuela, the imminent breakthrough foreshadows the formal end of an “interim government” led by

Juan Guaidó,

a U.S.-backed opposition leader whose fragile political mandate will lapse in early January.

On Thursday, the Norwegian embassy in Mexico said the Maduro government and the Venezuelan opposition coalition would meet Saturday and sign a “partial agreement” on implementing social programs. Norway has brokered previous talks between the Maduro government and its opponents.

Once it is allowed to return to Venezuelan oil fields and associated oil-processing plants under a new, roughly 1,000-page contract that it was allowed to negotiate with PdVSA, Chevron faces challenges that could limit its ability to increase production quickly. Those include managing everything from fuel shortages to accident-prone oil infrastructure to security and corruption risks. 

Some analysts have said Venezuela’s oil production is likely to hit a ceiling of about 1 million barrels a day in the medium term. Venezuela now produces about 700,000 barrels a day, compared with more than 3 million barrels a day in the 1990s. 

Chevron Chief Executive

Mike Wirth

said recently in a television interview that it would take months and years to refurbish oil fields and equipment and mobilize workers to help lift production. “It wouldn’t be an instantaneous effect,” he said.  

Europe’s

Repsol SA

and

ENI

SpA, and India’s Reliance, are among non-U. S. oil companies monitoring developments in anticipation of also re-engaging with Venezuela. Others monitoring events include Venezuela’s creditors looking to initiate a debt restructuring by next year.

Vivian Salama contributed to this article.

Write to Collin Eaton at [email protected]

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