The United States has been preparing to authorize Chevron to increase Venezuela’s oil production

  • The US is ready to allow the oil giant to produce and sell Venezuelan oil
  • Chevron has billions of unpaid debts from state-run PDVSA
  • US aims to displace Venezuelan oil sales from shadow companies

HOUSTON, Nov 23 (Reuters) – Chevron Corp could soon get U.S. approval to expand operations in Venezuela and resume trading its oil once the Venezuelan government and its opposition resume political talks, they said Wednesday four people close to the matter.

The US authorization for Chevron to help rebuild the country’s dwindling oil production has been one of the biggest plumes to kick-start talks between the Venezuelan government and its opposition.

US officials this year have tried to facilitate a return to negotiations between socialist President Nicolas Maduro and the country’s opposition by offering a slight easing of sanctions and releasing some Venezuelans to US prisons.

Both Venezuelan parties and US officials are pushing to hold talks in Mexico City this weekend, the people said, the first since October 2021. Maduro has gained leverage this year with newly elected leftist leaders in Brazil and Colombia and the weakening of opposition support.

Chevron declined to comment on the pending approval or terms. The second-largest US oil company remains compliant with the terms of its existing license, a spokesman said. A license that allows maintenance operations expires on December 1st.

LICENSE TERMS

The terms prepared for approval will prevent Venezuelan state oil company PDVSA from receiving proceeds from Chevron’s oil sales. And they will cut “the use of corrupt shadow companies that control the flow of Venezuelan oil to countries like China,” said a person familiar with the matter in Washington.

White House officials aim to “shift oil sales from illicit and non-transparent channels to transparent and legitimate channels,” the person said. The US could revoke authorizations if the Maduro administration fails to negotiate in good faith or deliver on its commitments, that person said.

“We have long made clear our willingness to provide targeted aid based on concrete steps that alleviate the suffering of the Venezuelan people and bring them one step closer to restoring democracy,” a US State Department spokesman said.

US President Joe Biden’s administration has reason to give Chevron a broader operating license as US shale production earnings slow, Russia’s oil exports down due to sanctions, and Saudi Arabia signals possible OPEC production cuts.

The United States has kept oil prices from soaring this year by releasing more than 200 million barrels of the nation’s emergency oil reserves. But those releases should end soon.

PRE-SANCTIONS EXIT

The Biden administration had signaled that any easing of Venezuelan sanctions, including giving Chevron a broad license to boost oil production and regain trade privileges in Venezuela, would only come if the two sides make progress in policy talks. .

The US Treasury could issue a new license on Monday or Tuesday. The extended terms would not be a response to concerns over energy prices, but reflect a desire to “support the restoration of democracy in Venezuela,” one of the people said.

Chevron partners with PDVSA in several oil joint ventures that pump and process crude oil for export. Together, the firms had produced around 200,000 barrels per day (bpd) before US sanctions and a lack of funding cut back on their production.

PDVSA did not respond to requests for comment on the resolutions.

Following oil sanctions against Venezuela in 2019, Chevron won an exemption to trade its Venezuelan crude to recover billions of dollars in outstanding debt. Those privileges were suspended by then-President Donald Trump a year later as part of his “maximum pressure” strategy to oust Maduro, whose 2018 re-election went unrecognized by the West.

The United States this year has begun to heed more urgently Chevron’s request to expand operations as Washington seeks oil to replace supplies affected by sanctions to Russia and OPEC’s decision to cut production.

ASSEMBLY PRESSURE

In recent weeks, representatives of Maduro and the opposition have held discussions in Paris under the auspices of the presidents of France, Colombia and Argentina to break the political deadlock.

In Washington, Republicans and some of Biden’s fellow Democrats have been skeptical Maduro is ready to negotiate in good faith and are against easing sanctions unless he gives something in return.

A growing number of oil companies are exiting joint ventures with PDVSA due to mounting debt and frozen operations. The contraction positions Chevron as the only strong partner left able to revive production, set to fall to about 650,000 barrels per day this year, below the official target of 2 million barrels per day.

Venezuela holds about 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.

(This story was re-archived to add the missing word “cut” in paragraph 6.)

Reporting by Marianna Parraga in Houston; Additional reporting by Sabrina Valle, Matt Spetalnick and Vivian Sequera; Editing by Gary McWilliams and Josie Kao

Our standards: the Thomson Reuters Trust Principles.

Marianna Parraga

Thomson Reuters

Focused on energy-related sanctions, corruption and money laundering with 20 years of experience in the Latin American oil and gas sector. A Venezuelan native and Houston resident, she is the author of the book “Oro Rojo” about the troubled Venezuelan state-owned company PDVSA and a mother of three boys.

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