The Trump administration said on July 26 it has renewed Chevron Corp.’s license to drill for oil and gas in Venezuela despite sanctions, signaling it sees value in having the U.S. oil producer operate in a country on the verge of economic and political collapse.
The Treasury Department said it renewed the license for three months for Chevron, the last U.S. oil company operating in Venezuela, a member of the OPEC producer group. The license runs through Oct. 25, 2019.
“Our operations in Venezuela continue in compliance with all applicable laws and regulations,” Chevron spokesman Ray Fohr said in a release.
The United States imposed heavy sanctions on Venezuela early this year in an effort to force out socialist President Nicolas Maduro. Washington supports opposition leader Juan Guaido, the head of the National Assembly.
In January, the administration imposed sanctions on Venezuela’s state-run oil company PDVSA that have cost Maduro’s government billions of dollars in oil assets but issued Chevron a six-month license to keep its operations going.
Chevron has four joint ventures with PDVSA that produce the equivalent of about 200,000 barrels per day of oil (bbl/d), and its stake in the ventures recently produced about 40,000 bbl/d. The company, which has been in Venezuela for nearly 100 years, says there are about 8,000 employees, contractors and direct suppliers involved in the ventures.
The renewal of the license was a win for Secretary of State Mike Pompeo and others in the administration who believe that having a U.S. company in Venezuela would be an asset after any ouster of Maduro and would serve as a beachhead to help the country's oil dependent economy recover more quickly.
The president’s national security adviser John Bolton, who has pushed for maximum pressure on Venezuela, had favored letting Chevron’s license expire in hopes it would tighten the noose on Maduro’s leadership by leading to another dip in the country’s energy production.
The Treasury Department also renewed licenses for three months for oil field service companies Halliburton Co, Schlumberger, Baker Hughes, a GE company, and Weatherford International. All have largely halted operations in Venezuela because of the instability.
A U.S. State Department spokesperson said the license had been extended for the five companies, adding that “the limited scope of the license is intended to facilitate U.S. oil companies in abiding by their contractual obligations, maintaining their operations assuming they choose to do so, and avoiding economic harm to the United States.”
The spokesperson added that Washington “will continue to take appropriate action against Maduro and those aligned with him.”
As of July, Venezuela’s output was just 734,000 bbl/d, about half of what it averaged in 2018, prior to U.S. sanctions, when production was 1.4 million bbl/d, according to OPEC figures.
U.S. oil output growth is expected to slow over the next five years, likely prompting oil majors to "gobble up" smaller shale oil producers, Mark Papa told Reuters.
As we look back on 2019, and ask ourselves where the E&P industry is headed, we may wonder where we may find wisdom.
Speaking during the opening day of IPTC, Bahrain Oil Minister Sheikh Mohammed bin Khalifa Al Khalifa also said he sees producers challenged by rising energy demand in the future.