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By Patricia Garip, Collin Eaton and José de Córdoba- The United States (U.S) is poised to grant a license to Chevron Corp. CVX -0.89%decrease; red down pointing triangle to pump oil in Venezuela, a policy shift that signals the easing of yearslong sanctions and could open the door for other oil companies to do business there.
The U.S. oil company would regain partial control of its oil-production and maintenance activities in dilapidated Venezuelan oil fields it has retained stakes in through joint ventures with the state-run oil company Petróleos de Venezuela SA. It wouldn’t make new investments there until certain debts are repaid, which could take years, according to people familiar with the matter.
Granting the new license is contingent on the Venezuelan government and its political opponents’ announcement, expected Saturday, to implement a $3 billion humanitarian program using Venezuelan funds unfrozen by the U.S. as well as an agreement to resume talks in Mexico City next month on resolving the country’s political crisis through free and fair elections, people familiar with the matter said. The talks would quickly set in motion U.S. authorization for Chevron’s return to Venezuela’s oil fields, according to the people.
“Between the 25th and 26th of November, the dialogue between the Maduro government and the Venezuelan opposition will restart,” Colombian President Gustavo Petro, who has been in communication with Mr. Maduro, wrote in a tweet Wednesday.
The license, which isn’t permanent and would need future renewal, would return Chevron’s position in Venezuela to a sanctions framework similar to one in effect in 2019, before the Trump administration clamped down further on Chevron’s activities as part of a “maximum pressure” campaign aimed at ousting the government of Venezuela’s Nicolás Maduro.
The Wall Street Journal reported in October the Biden administration was preparing to scale down sanctions on Venezuela’s authoritarian regime to allow Chevron to resume pumping oil there, paving the way for a potential reopening of international markets to oil exports from Venezuela.
Reuters reported earlier that Chevron could soon win U.S. approval to vastly expand operations in Venezuela.
“We have long made clear our willingness to provide targeted relief based on concrete steps that alleviate the suffering of the Venezuelan people and bring them closer to a restoration of democracy,” a spokesperson for the U.S. National Security Council said. “Any step taken is done in coordination with [Venezuela’s opposition coalition].”
Chevron spokesman Ray Fohr said the company was in compliance with the current sanctions framework.
The developments come just ahead of new Western sanctions on Russian oil that threaten to tighten global supplies and lift prices. The Biden administration’s move to ease sanctions on Venezuela has been seen as an effort to send a well-timed psychological signal to markets concerned about a potential future shortfall.
“With the price cap on Russian oil, supply is most likely going to be constrained further,” said Ali Moshiri, a former Chevron executive who oversaw the expansion of the company’s operations in Latin America and worked closely with Venezuelan officials. “Additional supply has to come from other sources, and Venezuela can be one of those sources that brings additional supplies.”
Mr. Moshiri is working as a consultant for Chevron in Venezuela.
At the expected meeting Saturday between the Maduro regime and Venezuela’s opposition coalition, known as the Unitary Platform, the parties are likely to announce an agreement on using about $3 billion of Venezuelan state funds frozen in overseas banks by sanctions to procure humanitarian aid and rebuild critical infrastructure for electricity and water- treatment needs, according to people familiar with the matter.
Also expected is an announcement that they will begin meeting in December to develop a timeline and framework to usher in political reforms and hold presidential elections by 2024, the people said.
Any authorisation provided by the Treasury Department would be time limited and would prevent PdVSA, the state-run oil company, from receiving profits from the oil sales by Chevron, according to people familiar with the matter. The U.S. would retain the authority to amend or revoke authorizations if the Maduro regime doesn’t negotiate in good faith or follow through on its commitments, the people said.
For the Biden administration, U.S. domestic political blowback over the policy change is seen as manageable following the midterm elections, said people familiar with the matter, partly because Florida, whose large Cuban and Venezuelan communities support Venezuelan sanctions, is now seen as lost to the GOP.
Inside Venezuela, the imminent breakthrough foreshadows the formal end of an “interim government” led by Juan Guaidó, a U.S.-backed opposition leader whose fragile political mandate will lapse in early January.
The announcement of the coming agreement is expected to be made Thursday by the Norwegian government, which has brokered previous talks between the Maduro government and its political opponents.
Once it is allowed to return to Venezuelan oil fields and associated oil-processing plants under a new, roughly 1,000-page contract that it was allowed to negotiate with PdVSA, Chevron faces challenges that could limit its ability to quickly increase production quickly. Those include managing everything from fuel shortages to accident-prone oil infrastructure to security and corruption risks.
Some analysts have said Venezuela’s oil production is likely to hit a ceiling of about 1 million barrels a day in the medium term. Venezuela now produces around 700,000 barrels a day, compared with more than 3 million barrels a day in the 1990s.
Chevron Chief Executive Mike Wirth recently said in a TV interview it would take months and years to refurbish oil fields and equipment and mobilize workers to help lift production. “It wouldn’t be an instantaneous effect,” he said.
Europe’s Repsol SA and ENI SpA, and India’s Reliance, are among non-U. S. oil companies monitoring developments in anticipation of also re-engaging with Venezuela. Other monitoring events include Venezuela’s creditors looking to initiate a debt restructuring by next year. (Wall Street Journal)