Chevron Awaits Approval from the U.S. to Restart Venezuela Operations

U.S. fossil fuel giant Chevron is nearing an approval from Washington to expand operations in Venezuela and resume oil trading from the Latin American nation, once the Venezuelan government and the country’s political opposition resume political talks. A U.S. authorization for Chevron to help rebuild the country’s lagging oil production was one of the issues for restarting talks between the Maduro government and his opposition. U.S. officials this year have been trying to push the two sides to return to the negotiating table by offering a slight sanctions ease and releasing some Venezuelans in U.S. jails.

Both Venezuelan parties and U.S. officials are pushing to hold talks, which would be the first since 2021, in Mexico City this weekend. Maduro gained clout this year with newly elected leftist leaders in Brazil and Colombia and the opposition’s weakening support.

The terms of the Chevron approval is expected to prevent Venezuela’s state-run oil firm PDVSA from receiving proceeds from Chevron’s oil sales. It also aims to cut the “shadow firms” that help deliver Venezuelan oil to countries like China. By doing that, Washington wants to shift oil delivery from illicit and non-transparent channels to to transparent, legitimate channels. The United States could revoke permissions if the Maduro administration fails to negotiate in good faith or uphold its commitments.

The Biden administration could grant Chevron a wider operating license, as U.S. shale production gains are slowing, Russia’s oil exports shrinking under sanctions and Saudi Arabia signaling possible OPEC output cuts.

The administration, which has released more than 200 million barrels of oil from the U.S. strategic reserve, also sets to end that soon.

Washington had signaled any easing of Venezuela sanctions, including granting Chevron a broad license to revive oil output and regain trading privileges in Venezuela, would depend on the progression of the two sides in political talks.

Chevron is a partner with PDVSA in several oil joint ventures that produce and process crude oil for export. Combined, the ventures had produced about 200,000 barrels per day (bpd) before the 2019 U.S. sanctions and lack of financing cut their output.

A growing number of oil firms are leaving joint ventures with PDVSA over mounting debt and frozen operations. The shrink positions Chevron as the only strong partner left that could revive output, set to fall this year to about 650,000 bpd, below the official target of 2 million bpd.

Venezuela holds about 300 billion barrels of oil reserves, the world’s largest, but has not been able to hit its production targets due to underinvestment, poor maintenance, lack of supplies and U.S. sanctions.

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