The United States Treasury Department is reportedly set to renew oil corporation Chevron’s licence in Venezuela.
According to Reuters, the Treasury’s Office of Foreign Assets Control is weighing issuing a license by June 1 with some of the conditions Chevron had during 2020, which allowed certain drilling, processing or shipping operations involving Venezuelan oil.
A source close to the negotiations said that the extended sanctions waiver is yet to be approved, and the possibility remains of Chevron keeping its current minimal licence.
Senior US officials speaking anonymously to reporters announced last week that the Biden administration had authorised the oil giant to negotiate its licence and “the terms of potential future activities in Venezuela” with Venezuelan state oil company PDVSA. The relaxation of restrictions would include allowing European oil companies to negotiate the import of Venezuelan crude to Europe amidst scarce energy supplies and skyrocketing fuel costs.
The announcement was confirmed by Venezuelan vice president Delcy Rodríguez, who hoped that the preliminary measures would “pave the way for the total lifting of the illegal sanctions”.
In efforts to oust the Nicolás Maduro government, the US Treasury Department imposed financial sanctions against PDVSA in 2017, followed by a full-fledged oil embargo in 2019 and subsequent secondary sanctions. The measures crippled Venezuela’s oil industry, as foreign companies were forced to abandon their joint ventures and trade deals with PDVSA, sending output to historic lows of less than 500,000 barrels per day (bpd) by the end of 2020.
Chevron is the only international oil company since then to secure a sanctions waiver to continue working in some capacity in its four joint ventures in Venezuela. However, the Treasury Department ordered Chevron in April 2020 to wind down operations and limited its licence to essential work for the preservation of its assets in Venezuela.
Chevron began lobbying US officials last year to obtain a broader licence and take control of oil projects in Venezuela, in order to collect PDVSA’s US $3 billion outstanding debt. While the company had made some inroads, it was the ban on Russian oil imports in March following the Ukrainian war which led to the current possibility of sanctions relief. Caracas used to export approximately 500,000 bpd to American refineries until the 2019 embargo.
For its part, the Venezuelan government has repeatedly called for the complete removal of unilateral coercive measures against its oil industry, which at one point pulverised 90% of Venezuela’s foreign income. The sanctions have exacerbated a previous economic crisis and created acute gasoline and diesel shortages.
With sanctions relief far from materialising, Venezuela began recovering oil production by ramping up cooperation with Iran through an oil-for-condensate swap deal signed in September last year. The latest OPEC monthly report placed Venezuela’s April production at 707,000 bpd.
Iran has played a key role in tackling fuel scarcity by sending fuel shipments, while also supplying materials and expertise to kickstart several refineries in 2020.
Iranian oil minister Javad Owji met with President Maduro in Caracas in early May to discuss energy deals. Soon after, they expanded the oil-for-condensate swap agreement to add the supply of Iranian heavy crude to feed refineries and increase fuel production.
Owji’s visit was followed by the announcement of the state National Iranian Oil Refining and Distribution Company (NIORDC) reportedly signing a €110 million deal with PDVSA to bring the 146,000 bpd El Palito refinery in Carabobo state to full capacity.
According to Reuters, Iranian state firms are negotiating another contract to restore the Amuay and Cardón refineries, which form the 955,000 bpd-capacity Paraguaná Refinery Complex in Falcón state — the largest in the hemisphere.
“They [Iranian officials] have been very focused on preparations, including housing for the workers,” said one of the people involved in the talks. The Paraguaná complex is currently operating at just 17% of capacity.
Nonetheless, efforts to recover the country’s oil facilities have been constantly plagued by numerous accidents and alleged sabotage acts. President Maduro denounced on May 24 terrorist attacks against the Cardón and El Palito refineries, as well as the country’s main electricity generator, the Guri Dam, located in Bolívar state.
“Our refineries are under attack by infiltrated enemies to harm our refining network, to harm our people. Behind this is the savage right-wing [sector] and the plans of Iván Duque,” said Maduro, pointing the finger at his Colombian counterpart, who he has accused on several occasions of financing sabotage against Venezuela’s infrastructure.
Venezuelan oil minister Tareck El Aissami said the attacks did not compromise fuel production.
[Abridged from Venezuela Analysis.]