Chevron, along with service companies Schlumberger, Halliburton, Baker Hughes, and Weatherford, has been granted a 6-month extension of its US sanctions waiver allowing it to maintain its existing assets in Venezuela, but not much else.
In mid-May, the Biden administration seemed to signal a possible softening of its sanctions position on Caracas considering the US ban on Russian oil imports that President Biden signed into law on 11 April 2022, leading some media to speculate that Chevron might soon be greenlighted to start selling Venezuelan heavy crude again to US refineries.
But the extension issued by the US Treasury Department on 27 May contained the same restricted terms of the previous extension which allowed Chevron and other companies covered in the order to only preserve their assets in Venezuela while forbidding them to drill, lift, buy, or process Venezuelan crude or oil products, or to interface with Venezuelan officials.
The newest extension restricts Chevron to only conducting "transactions and activities necessary for safety or the preservation of assets in Venezuela," including those related to the safety of staff and the integrity of operations, participation in shareholder and board meetings, and payments on third-party invoices, local taxes, utility services, and salaries, Reuters reported.
The document also authorizes oilfield service companies Halliburton, Schlumberger, Baker Hughes, and Weatherford International to maintain their assets in Venezuela.
Earlier speculation that the White House may relax terms governing Chevron’s operations grew out of a separate authorization widely reported in mid-May that allows Chevron to engage in talks with Venezuela’s state oil company Petróleos de Venezuela (PDVSA) on its future activities in the South American country.
PDVSA owns the majority stakes in Chevron’s four onshore joint ventures (JVs) in Venezuela. Chevron has been active in Venezuela since the Boscán field discovery in the 1920s, and three of its four JVs are focused on heavy or extra-heavy crude projects in the western and eastern ends of the country, according to the US major’s website.
Chevron also holds a 60% interest in the offshore Loran gas field Block 2 and the Manatee field in Trinidad and Tobago which form a single cross-border field along the maritime border with Venezuela. It likewise is sanctioned.
But it is onshore heavy-oil production that has grabbed the spotlight in negotiations to expand activities allowed under Chevron’s waiver. With the US banning the importation of Russian crude, Venezuelan barrels, particularly the country’s extra-heavy-oil barrels, are becoming an attractive alternative.
Four years ago, Gulf Coast refineries that “are set up to run heavier crude slates” were importing “half a million barrels a day” from Venezuela, Rystad Energy wrote in a May report.
Similarly, a recent article in The Economist noted that even before Russia crossed the border into Ukraine, Venezuela had upped its crude production, having “doubled its output to around 800,000 B/D” over the last year—"enough to replace the 199,000 B/D the United States imported from Russia in 2021.”
It is no secret that US refineries built to process viscous Venezuelan crude struggle with less viscous Saudi imports or US domestically produced shale oil since the ban on Russia’s heavier Urals blend.
At a high-level meeting in March in Caracas, US officials raised the possibility of Venezuelan crude returning to the US, once its largest single market, Reuters reported. But such an easing of sanctions would happen only if talks progress between President Nicolas Maduro and opposition leader Juan Guaido (who the US recognizes as the country’s rightful leader) on the scheduling of new elections.
Chevron, last US oil company active in Venezuela, had been allowed to trade Venezuelan oil from 2019 through April 2020 but its waivers since then have been limited to only preserving company assets.
Outside of the US, Italy’s Eni, Spain’s Repsol, and India’s ONGC Videsh are pressing Washington to authorize their plans to cash out pending debt and dividends from their Venezuelan JVs.
The US State Department and India’s embassy in Washington are discussing a possible oil-for-debt exchange to cover $420 million that ONGC was due from its Venezuelan JVs before sanctions, according to Indian business media, The Economic Times.
In August 2021, France’s TotalEnergies and Norway’s Equinor divested their interests in Venezuela’s extra-heavy-crude oil Petrocedeño project onshore in the Orinoco Belt, transferring their interests to PDVSA.
