Black gold’s lure

Will Washington let Chevron pump oil in Venezuela?

Chevron is set to trade Venezuelan oil if the US relaxes sanctions. The company is looking to take operating control of its joint ventures in Venezuela to boost crude supplies after Washington banned Russian oil imports. According to our sources, Chevron has begun assembling a trading team to market oil from Venezuela whilst looking to expand its role in the four joint ventures it shares with state-run company PDVSA.

A Venezuelan economist who recently added his name to a public letter requesting the Biden administration to ease sanctions explained, “It is fair to say that there is strong opposition to the easing of sanctions from lobbying by Juan Guaidó and from congressional elections this year where sentiment especially in Florida against Maduro is strong. That said, if prices were to reach USD 130 per barrel, the administration could face economic pressure to relax sanctions.”

“It is fair to say that there is strong opposition to the easing of sanctions from lobbying by Juan Guaidó and from congressional elections this year where sentiment especially in Florida against Maduro is strong.”

Economist, Venezuela

According to our sources, lobbying efforts are currently concentrated on allowing certain foreign companies to obtain special licenses from OFAC to increase their production in Venezuela and export that crude to the US. Our sources say that it is widely known in lobbying circles, that Chevron are leading these efforts alongside ONGC, ENI and REPSOL. All are interested in obtaining licenses and especially to be able to collect debts that the PDVSA has with them.

“Halliburton, Schlumberger, Baker Hughes and Weatherford are similarly involved in efforts to obtain these licenses,” adds the economist. An emerging markets economist with expertise on the Venezuelan petroleum sector explained, “A return to the pre-Chavista Oil Opening scheme is being studied, such as profit-sharing contracts and service contracts.” However, a university professor and opposition leader in Venezuela remarked that, “Oil Opening schemes would be insufficient due to the deep deterioration of PDVSA’s operational capacity, for which it would be necessary to go to a scheme similar to that of oil concessions, which existed until 1975, when the oil industry in Venezuela was nationalised.”

“Oil Opening schemes would be insufficient due to the deep deterioration of PDVSA’s operational capacity, for which it would be necessary to go to a scheme similar to that of oil concessions.”

Senior opposition figure, Venezuela

Regarding the state of PDVSA’s infrastructure, the emerging markets economist maintains that there is no certainty about its true situation whilst the university professor opined that the problem goes beyond the state of PDVSA infrastructure. Rather, the main obstacle is the state of the national electrical system. “By 2018, before the imposition of trade sanctions by the Trump administration, the production of Venezuelan crude oil had already fallen alarmingly to 1.1 million bpd, the oil infrastructure was already very deteriorated before these sanctions began. Now electricity is the problem,” adds the university professor.

Regarding production levels in the event of a relaxation of sanctions through the granting of special licenses from OFAC, Chevron estimates that it could contribute 400,000 bpd by the end of the year. In this scenario, a figure of 1.2 million bpd could be achieved. Without this relaxation of sanctions, the base scenario would be 700-800 thousand bpd, if Iranian diluents continue to arrive without problems. That said, even this figure could be unattainable due to serious operational challenges from oil to petroleum. Chevron’s pump dreams could come to fruition but there’s work to be done yet.

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