Chevron resumes Venezuelan oil production as US sanctions ease

(Bloomberg) – The Biden administration has granted Chevron Corp. permits to resume oil production in Venezuela after U.S. sanctions halted all drilling nearly three years ago.

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The abolition follows the resumption of talks by Venezuela’s political factions on Saturday with an agreement to jointly implement a humanitarian spending plan.

Chevron received a six-month license from the US Office of Foreign Assets Control, OFAC, that allows the company to produce crude oil and petroleum products in its projects in Venezuela, under a general license. of the United States Department of the Treasury. While no new drilling is allowed, the company will be able to repair and maintain the oil fields.

In 2020, before the US ordered a complete halt to drilling, Chevron’s share of crude oil production in Venezuela was 15,000 bpd, less than the output of a single oil field in the Permian.

The San Ramon, California-based driller is also allowed to resume crude exports that have been halted since 2019, as the US ramped up sanctions on the OPEC producer. All exports must go to the United States, and the company will be allowed to import inputs, including diluents used to boost crude oil production, from the United States.

“OFAC’s decision brings more transparency to Venezuela’s oil industry,” a Chevron representative said in an emailed statement. “The issuance of General License No. 41 means that Chevron can now commercialize the petrochemicals currently being produced from the company’s Joint Venture assets.”

The lifting of sanctions comes after Norwegian mediators announced the resumption of political talks between President Nicolas Maduro and the opposition this weekend. Venezuela’s return to negotiations is a key condition for easing restrictions on the oil-dependent nation’s crude output.

Read more: Venezuela restarts talks on opposition, hopes US loosens restraints

The license will not help alleviate an energy crisis that has caused inflation and slowed growth globally, but advances the political agenda with the aim of setting the conditions for the 2024 presidential election. of Venezuela.

Chevron’s chief executive, Mike Wirth, said in October it could take “months and years to begin maintenance, refurbishment of mines and equipment, and any changes to investments”. For some, Chevron’s projects could triple oil production to around 200,000 barrels per day in a period of six months to a year from the current 150,000, a person with knowledge of the situation said in this early year.

Oil production in Venezuela has rebounded this year to 679,000 bpd, far below the 2.9 million bpd produced a decade ago. Output fell after sanctions and mismanagement of oil fields and refineries under the socialist rules of Hugo Chavez and Maduro.

Previous talks between Maduro and the opposition have failed, most recently in October 2021. Interest in resuming talks has gained momentum as Venezuela faces competition. There is growing competition for Russian and Iranian barrels in Asia, the top destination for the country’s crude oil.

Venezuela’s state-owned energy company PDVSA will not receive a profit from the oil sales as the proceeds will be used to pay off old debts to Chevron. The US company would be prohibited from doing any dealings with Iran or dealing with Russian-owned or controlled entities in Venezuela.

OFAC’s decision also allows US service oil suppliers Halliburton Co., Schlumberger Ltd., Baker Hughes Co. and Weatherford International Plc. to restart work, the Treasury said. The license is valid until May 26, 2023.

–With support from Eric Martin and Amy Stillman.

(Updated with Chevron’s statement in sixth paragraph.)

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