US gives Chevron more time in Venezuela: Update

  • Market: Crude oil
  • 17/11/20

Adds comment from Chevron, updates throughout.

The Treasury Department today granted Chevron permission to remain in Venezuela until 3 June 2021, effectively leaving further decisions on the oil major's future in the South American Opec country to US president-elect Joe Biden's incoming administration.

Chevron's current waiver from US oil sanctions imposed on Venezuela in 2019 was due to expire on 1 December. The 180-day extension granted to Chevron also applies to US services giants Halliburton, Schlumberger, Baker Hughes and Weatherford.

Conditions on the waiver remain unchanged, preventing Chevron from drilling, lifting, purchasing or processing Venezuelan-origin crude or oil products. Chevron's main Venezuelan asset is a minority stake in the PetroPiar heavy crude upgrading venture, based in the Orinoco heavy oil belt with an upgrader at the Jose terminal on the coast. The company also has a minority stake in the PetroBoscan heavy crude venture in western Venezuela.

Venezuela's crude production has entered another downswing this month following a US decision to end crude-for-diesel swaps, slipping below an October average of 350,000 b/d after Spanish firm Repsol, Italy's Eni and Indian company Reliance stopped taking the country's crude, local oil industry sources tell Argus. Venezuela's production has fallen by half since Chevron last obtained its waiver in April.

Chevron said it will continue to comply with US sanctions regulations that apply to its Venezuela activities. "We remain committed to the integrity of our joint venture assets, the safety and well-being of our employees and their families, and the company's social and humanitarian programs during these challenging times," Chevron said.

The Biden team has not detailed its approach to existing Venezuela sanctions, but it is understood to view Chevron's presence in the country through the same lens as its predecessor. Supporters of further waiver extensions have argued that forcing Chevron to leave Venezuela would allow Caracas to nationalize US assets and potentially hand them to Russian or Chinese state-controlled companies.

President Donald Trump's administration has set an ambitious goal for its sanctions — forcing out Venezuelan president Nicolas Maduro's government — and seems far from satisfying that objective. "On the other hand, I give the Trump administration credit for assembling a real international coalition of Europeans and Latin Americans in support of pressure on the Maduro regime," said Dan Fried, who in 2013-17 coordinated the State Department's sanctions programs. "Staying the course on Venezuela, whatever the odds of near-term success, may be practical," Fried said in a report prepared for Washington-based think tank Atlantic Council.

Maduro routinely blames US sanctions for prolonged hardship, manifested by severe shortages of fuel for transportation, agriculture and power generation. But the decline of Venezuela's oil sector predates US sanctions as a result of decades of mismanagement and labor flight.

Maduro's US-backed rival Juan Guaido, who heads a skeleton interim administration, is now at risk of losing his constitutional standing in 6 December legislative elections that the mainstream opposition is boycotting.


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